Sectoral Specialisation and Growth Rate Differences Among Integrated Economies

This paper analyses the emergence of sectoral specialisation and its effects on growth rate differences providing an alternative approach to endogenous growth processes. To achieve this, we first investigate the conditions leading to sectoral specialisation as an emergent property from the dynamics generated by the model. Second, the paper investigates the relationship between specialisation patterns and growth rate differences among economies. Here again, growth rates differences are treated as an emergent property. The framework developed relies on a Kaldorian growth model with evolutionary micro-founded technical change "à la Nelson and Winter". The paper develops a multi-sectoral growth model. Following the Kaldorian tradition economic growth is here driven by the aggregate demand dynamics, constrained by the balance of payment. Technical change modeling follows the evolutionary literature on growth and industrial dynamics. Firms production techniques are build on the accumulation of capital vintages, developed through an R&D activity. Firms and therefore economies are subject to selection mechanisms through sector-wide replicator dynamics. Two regimes emerge from the simulation, the first is linked to technology dynamics and selection mechanisms and the second is linked to the evolution of the demand structure and demand characteristics. First, specialisation emerges from the heterogeneity in technical change generated by the micro-dynamics. The latter are amplified by the inter-sector selection process provided at the macro-level through wage dynamics. These mechanisms also generate growing differences in GDP growth rates. Second, demand factors influence the concentration of production in a limited number of sectors, this even when neutralising the effect of technical change. These demand factors also exert a major effect on patterns of growth rates differences. For each regimes, specialisation is combined to growth rate differences. But when in the first regime these differences are only transitory, in the second they are permanent.