Barriers to Accumulation and Productivity Differences in a Two Sector Growth Model
AbstractBarriers to investment are often regarded as an important determinant of the variation in international income levels. Nevertheless, in the standard neoclassical growth model, these barriers have only have small effects on per capita incomes. We consider the effects of barriers to accumulation in a two-sector neoclassical model that also exhibits barriers to labor mobility. Numerical simulation show that barriers to accumulation have a magnified effect in this model. The results imply that if labor markets are not efficient, then barriers to accumulation may be an important determinant of a country's income level. Moreover, we show that the removal of these barriers can produce several decades of rapid growth, reminiscent of economic growth miracles.
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Bibliographic InfoPaper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200510.
Date of creation: 10 Nov 2005
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Barriers; Development; Dual economies; Growth; Wage gaps;
Find related papers by JEL classification:
- O0 - Economic Development, Technological Change, and Growth - - General
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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- John Landon-Lane & Peter Robertson, 2005. "A Note on Barriers to Capital Accumulation and Income," Departmental Working Papers 200509, Rutgers University, Department of Economics.
- Areendam Chanda & Carl-Johan Dalgaard, 2008. "Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography," Economica, London School of Economics and Political Science, vol. 75(300), pages 629-661, November.
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