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Economic growth and sector dynamics

Listed author(s):
  • Zeira, Joseph
  • Zoabi, Hosny

This paper analyzes the endogenous determination of sectors in a growing economy. It assumes that there are traditional sectors and modern sectors and economic growth is driven by rising productivity of the modern sectors. It also assumes that individuals are heterogeneous, which leads to increasing marginal opportunity costs in creating new modern sectors. We show that under these main assumptions, economic growth first increases diversification to sectors and then reduces it. We also show that for the equilibrium to be stable and well-behaved, it is required that the modern and traditional sectors should be substitutes and not complements.

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File URL: http://www.sciencedirect.com/science/article/pii/S0014292115000884
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 79 (2015)
Issue (Month): C ()
Pages: 1-15

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Handle: RePEc:eee:eecrev:v:79:y:2015:i:c:p:1-15
DOI: 10.1016/j.euroecorev.2015.06.007
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
  2. Joseph Zeira, 1998. "Workers, Machines, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1091-1117.
  3. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
  4. Susanto Basu & David N. Weil, 1998. "Appropriate Technology and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1025-1054.
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  7. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-751, August.
  8. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 563-606.
  9. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
  10. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, 06.
  11. Kiminori Matsuyama, 2000. "A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1093-1120, December.
  12. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
  13. repec:eee:macchp:v2-3 is not listed on IDEAS
  14. Diego Comin & Bart Hobijn, 2011. "Technology Diffusion and Postwar Growth," NBER Chapters,in: NBER Macroeconomics Annual 2010, Volume 25, pages 209-246 National Bureau of Economic Research, Inc.
  15. 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 431-452, May.
  16. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
  17. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
  18. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941 Elsevier.
  19. Regev, Tali & Zoabi, Hosny, 2014. "Talent Utilization And Search For The Appropriate Technology," Macroeconomic Dynamics, Cambridge University Press, vol. 18(04), pages 863-882, June.
  20. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
  21. Francesco Caselli, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
  22. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
  23. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
  24. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  25. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
  26. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
  27. Jones, C.I., 2016. "The Facts of Economic Growth," Handbook of Macroeconomics, Elsevier.
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