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Barriers to Capital Accumulation and Aggregate Total Factor Productivity

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  • Diego Restuccia

Abstract

I develop a growth model where a single good can be produced with a traditional and a modern technology. The traditional technology features low total factor productivity (TFP) and a low share of reproducible capital. In this framework, barriers to capital accumulation affect technology use and therefore aggregate TFP. The theory thus connects recent models of factor accumulation and of TFP. The model is calibrated by interpreting traditional production as agriculture and nonreproducible capital as land. The theory implies that barriers are associated with large agricultural shares, as supported by cross-country and time-series evidence. The required TFP differences needed in the model to account for a given income disparity are reduced by 1/2 relative to the standard model that abstracts from technology choice. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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  • Diego Restuccia, 2004. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 225-238, February.
  • Handle: RePEc:ier:iecrev:v:45:y:2004:i:1:p:225-238
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    References listed on IDEAS

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    Cited by:

    1. Nezih Guner & Gustavo Ventura & Xu Yi, 2008. "Macroeconomic Implications of Size-Dependent Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 721-744, October.
    2. Wingender, Asger Moll, 2015. "Skill complementarity and the dual economy," European Economic Review, Elsevier, vol. 74(C), pages 269-285.
    3. Antunes, Antonio R. & Cavalcanti, Tiago V. de V., 2007. "Start up costs, limited enforcement, and the hidden economy," European Economic Review, Elsevier, vol. 51(1), pages 203-224, January.
    4. Rattsø, Jørn & Stokke, Hildegunn E., 2012. "Trade policy in a growth model with technology gap dynamics and simulations for South Africa," Journal of Economic Dynamics and Control, Elsevier, vol. 36(7), pages 1042-1056.
    5. Areendam Chanda & Carl-Johan Dalgaard, 2008. "Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography," Economica, London School of Economics and Political Science, vol. 75(300), pages 629-661, November.
    6. Pedro S. Amaral & Erwan Quintin, 2005. "Finance matters," Center for Latin America Working Papers 0104, Federal Reserve Bank of Dallas.
    7. Bénabou, Roland & Ticchi, Davide & Vindigni, Andrea, 2015. "Forbidden Fruits: The Political Economy of Science, Religion, and Growth," CEPR Discussion Papers 10548, C.E.P.R. Discussion Papers.
    8. John Landon-Lane & Peter Robertson, 2005. "A Note on Barriers to Capital Accumulation and Income," Departmental Working Papers 200509, Rutgers University, Department of Economics.
    9. Marco A Espinosa-Vega & Richard C. Barnett, 2005. "Barriers to Capital Accumulation and the Incidence of Child Labor," IMF Working Papers 05/220, International Monetary Fund.
    10. Areendam Chanda & Beatrice Farkas, 2009. "Technology-Skill Complementarity and International TFP Differences," DEGIT Conference Papers c014_028, DEGIT, Dynamics, Economic Growth, and International Trade.
    11. Rui Castro & Gian Luca Clementi & Glenn Macdonald, 2009. "Legal Institutions, Sectoral Heterogeneity, and Economic Development," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 529-561.
    12. Masako Kimura & Daishin Yasui, 2010. "The Galor–Weil gender-gap model revisited: from home to market," Journal of Economic Growth, Springer, vol. 15(4), pages 323-351, December.
    13. repec:rim:rimwps:05-07 is not listed on IDEAS
    14. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," Macroeconomics 0305002, EconWPA.
    15. Aiyar, Shekhar & Dalgaard, Carl-Johan, 2009. "Accounting for productivity: Is it OK to assume that the world is Cobb-Douglas?," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 290-303, June.
    16. John S. Landon-Lane & Peter E. Robertson, 2009. "Factor Accumulation And Growth Miracles In A Two-Sector Neoclassical Growth Model," Manchester School, University of Manchester, vol. 77(2), pages 153-170, March.
    17. Brady, Michael P. & Sohngen, Brent, 2008. "Agricultural Productivity, Technological Change, and Deforestation: A Global Analysis," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6420, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Tasso Adamopoulos, 2008. "Land Inequality and the Transition to Modern Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 257-282, April.
    19. Schmidt, Gabriela, 2010. "Technology choice and international trade," Kiel Working Papers 1600, Kiel Institute for the World Economy (IfW).
    20. William Lord & Peter Rangazas, 2006. "Fertility and development: the roles of schooling and family production," Journal of Economic Growth, Springer, vol. 11(3), pages 229-261, September.
    21. Chaoran Chen, 2017. "Technology Adoption, Capital Deepening, and International Productivity Differences," Working Papers tecipa-584, University of Toronto, Department of Economics.
    22. Jørn Rattsø & Hildegunn E. Stokke, 2009. "Trade barriers to growth in South Africa: Endogenous investment-productivity-trade interaction," DEGIT Conference Papers c014_010, DEGIT, Dynamics, Economic Growth, and International Trade.
    23. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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