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Structural Change and the Kaldor Facts of Economic Growth

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  • Reto Foellmi
  • Josef Zweimüller

Abstract

We present a model in which two of the most important features of the long-run growth process are reconciled: the massive changes in the structure of production and employment; and the Kaldor facts of economic growth. We assume that households expand their consumption along a hierarchy of needs and firms introduce continuously new products. In equilibrium industries with an expanding and those with a declining employment share co-exist, and each such industry goes (or has already gone) through a cycle of take-off, maturity, and stagnation. Nonetheless macroeconomic aggregates grow pari passu at a constant rate.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 111.

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Handle: RePEc:zur:iewwpx:111

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Keywords: Kaldor facts; balanced growth; structural change; innovation; hierarchic preferences; demand externalities; multiple equilibria.;

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  1. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  2. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  4. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  5. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  6. Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 01/85, International Monetary Fund.
  8. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Chou, Chien-Fu & Talmain, Gabriel, 1996. " Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-23, December.
  10. Zweimüller, Josef, 1998. "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," CEPR Discussion Papers 1880, C.E.P.R. Discussion Papers.
  11. Eswaran, Mukesh & Kotwal, Ashok, 1993. "A theory of real wage growth in LDCs," Journal of Development Economics, Elsevier, vol. 42(2), pages 243-269, December.
  12. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  13. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  14. Reto Foellmi & Josef Zweimüller, . "Income Distribution and Demand-induced Innovations," IEW - Working Papers 212, Institute for Empirical Research in Economics - University of Zurich.
  15. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  16. Laussel, Didier & Nyssen, Jules, 1999. "Endogenous growth and multiplicity due to finite patents' lifetime," Economics Letters, Elsevier, vol. 63(2), pages 167-173, May.
  17. repec:fth:stanho:e-92-3 is not listed on IDEAS
  18. Kiminori Matsuyama, 1999. "A Ricardian Model with a Continuum of Goods under Non-homothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Discussion Papers 1241, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  20. Baumol, William J & Blackman, Sue Anne Batey & Wolff, Edward N, 1985. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 806-17, September.
  21. Falkinger, Josef, 1994. "An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes," Ricerche Economiche, Elsevier, vol. 48(2), pages 123-139, June.
  22. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers 99001, Stanford University, Department of Economics.
  23. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-98, June.
  24. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
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Citations

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Cited by:
  1. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  2. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.
  3. Tombe, Trevor, 2010. "Regions, frictions, and migrations in a model of structural transformation," MPRA Paper 26641, University Library of Munich, Germany.
  4. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
  5. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc.
  6. Trevor Tombe, 2010. "The Missing Food Problem: How Low Agricultural Imports Contribute to International Income and Productivity Differences," Working Papers tecipa-416, University of Toronto, Department of Economics.
  7. Jaime Alonso-Carrera & Xavier Raurich, 2007. "Growth, Sectoral Composition, And The Wealth Of Nations," CAMA Working Papers 2007-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  8. Trevor Tombe, 2012. "Structural Change and Regional Convergence: The Case of Declining Transport Costs," Working Papers tt0061, Wilfrid Laurier University, Department of Economics, revised 2012.
  9. Andrés Maroto-Sanchez, 2010. "Growth and productivity in the service sector: The state of the art," Working Papers 07/10, Instituto Universitario de Análisis Económico y Social.
  10. Nilsson, Desirée, 2007. "Changing Export Structure According to Income Elasticity - Kaldor revisited," Working Paper Series in Economics and Institutions of Innovation 92, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  11. Matteo Lucchese, 2011. "Innovation, demand and structural change in Europe," Working Papers 1109, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.

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