Dualism and growth in transition economies: a two-sector model with efficient and subsidized enterprises
AbstractWe develop a two-sector growth model distinguishing between a private sector consisting of profit-making firms and a state-controlled sector consisting of subsidized firms. Both sectors produce the same good. The private sector generates learning-by-doing and technological spillovers, while the state-controlled one is technologically obsolete and ‘stagnant’. This distinction allows tracing the dual-economy stage of development observed in transition economies. While in some of them the period in which profit-making and loss-making enterprises coexist was rather brief, some continue to display this pattern because of their industrial legacies and politicoideological preferences. The model predicts that—ceteris paribus—the larger is the initial fraction of the workforce employed in the obsolete sector and the stronger is the degree of ideological hostility towards market forces, the lower is the speed at which a transition economy will converge to the income level of the most advanced countries.
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Bibliographic InfoPaper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 1015.
Date of creation: 2010
Date of revision:
Dual economy; endogenous growth; transitional economies;
Find related papers by JEL classification:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-04 (All new papers)
- NEP-CIS-2010-12-04 (Confederation of Independent States)
- NEP-DEV-2010-12-04 (Development)
- NEP-TRA-2010-12-04 (Transition Economics)
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