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The Dynamic Process of Economic Takeoff and Industrial Transformation

Author

Listed:
  • Ming-Jen Chang

    (Department of Economics, National Dong Hwa University, Hualien 97401, Taiwan, China)

  • Ping Wang

    (Department of Economics, Washington University in St. Louis, St. Louis, MO 63130, USA; National Bureau of Economic Research (NBER))

  • Danyang Xie

    (Center for Economic Development Research, Economics and Management School, Wuhan University, Wuhan 430072, China; Department of Economics, HKUST, Hong Kong, China)

Abstract

This paper studies the patterns and key determinants of staged economic development. We construct a two-sector dynamic general equilibrium model populated with one-period lived non-overlapping generations, featuring endogenous enhancement in modern technology and endogenous accumulation of labor skills and capital funds. We consider preference biases toward the traditional sector of necessities, capital barriers to the modern sector, and imperfect substitution between skilled and unskilled workers. By calibrating the model to fit historic U.S. development, we find that modern technologies, saving incentives and capital scales/barriers are the most important determinants of the takeoff time. By evaluating the process of economic development, we identify that what shapes saving incentives is most crucial for the speed of modernization after taking off. We further establish that labor, capital and output are most responsive to the initial state of modern technologies, but least responsive to skill endowments, along the dynamic transition path.

Suggested Citation

  • Ming-Jen Chang & Ping Wang & Danyang Xie, 2016. "The Dynamic Process of Economic Takeoff and Industrial Transformation," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 11(1), pages 60-87, March.
    • Handle: RePEc:fec:journl:v:11:y:2016:i:1:p:60-87
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-005-016-0005-3
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    Cited by:

    1. Luigi Aldieri & Maxim N. Kotsemir & Concetto Paolo Vinci, 2020. "The Effects of Collaboration on Research Performance of Universities: an Analysis by Federal District and Scientific Fields in Russia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(2), pages 766-787, June.
    2. Chu, Angus C. & Furukawa, Yuichi & Wang, Xilin, 2022. "Rent-seeking government and endogenous takeoff in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 72(C).

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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