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A growth model for a two-sector economy with endogenous productivity

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  • Codrina Rada

Abstract

A growth model is developed for an open dual economy. The economy expands due to a higher growth rate of labour productivity in the modern sector through the Kaldor-Verdoorn channel and higher effective demand through a Keynesian channel. The model incorporates a retardation mechanism affecting the slopes of productivity and output growth schedules as labour surplus and economies of scale diminish. A wage or profit-led regime and initial conditions may give rise to: de-industrialization in terms of both output and employment; a growth trap sustaining a situation of structural heterogeneity; or sustainable employment and adequate output and productivity growth.

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File URL: http://www.un.org/esa/desa/papers/2007/wp44_2007.pdf
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Bibliographic Info

Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 44.

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Length: 31 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:une:wpaper:44

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Keywords: productivity growth; two sector growth models; demand-led growth;

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  1. Canning, David J, 1988. "Increasing Returns in Industry and the Role of Agriculture in Growth," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 463-76, September.
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  3. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.
  4. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
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  8. Charles P. Blitch, 1983. "Allyn Young on Increasing Returns," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 5(3), pages 359-372, April.
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  10. William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993. "Good Policy or Good Luck? Country Growth Performance and Temporary Shocks," NBER Working Papers 4474, National Bureau of Economic Research, Inc.
  11. Lewis, W Arthur, 1979. "The Dual Economy Revisited," The Manchester School of Economic & Social Studies, University of Manchester, vol. 47(3), pages 211-29, September.
  12. Codrina Rada & Lance Taylor, 2006. "Developing and Transition Economies in the Late 20th Century: Diverging Growth Rates, Economic Structures, and Sources of Demand," Working Papers 34, United Nations, Department of Economics and Social Affairs.
  13. Lewis, W Arthur, 1980. "The Slowing Down of the Engine of Growth," American Economic Review, American Economic Association, vol. 70(4), pages 555-64, September.
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  15. Amartya K. Sen, 1966. "Peasants and Dualism with or without Surplus Labor," Journal of Political Economy, University of Chicago Press, vol. 74, pages 425.
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Cited by:
  1. Lance Taylor, 2009. "Growth, Development Policy,Job Creation and Poverty Reduction," Working Papers 90, United Nations, Department of Economics and Social Affairs.
  2. José Antonio Ocampo & María Angela Parra, 2006. "The Dual Divergence: Growth Successes and Collapses in the Developing World since 1980," Working Papers 24, United Nations, Department of Economics and Social Affairs.
  3. Viego, Valentina, 2010. "Rendimientos crecientes, costos de transporte, eslabonamientos verticales y asimetrías regionales persistentes
    [Increasing returns, transport costs, vertical linkages and persistent regional inequ
    ," MPRA Paper 26881, University Library of Munich, Germany, revised 04 Aug 2010.
  4. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.

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