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Costly Structural Change and Optimal Growth

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  • Ni, Shawn
  • Wang, Xinghe

Abstract

This paper studies the optimal growth of a developing economy that has a choice to expend a fixed amount of resource for a structural change that advances its production technology. It is shown that structural change is undertaken if capital stock is above a critical level. Economies undertaking structural change converge to a larger steady state and economies not undertaking structural change converge to a smaller steady state. The optimal policy correspondences and growth paths are characterized. The social optimum is shown implementable by a competitive equilibrium with lump-sum taxation.

Suggested Citation

  • Ni, Shawn & Wang, Xinghe, 1995. "Costly Structural Change and Optimal Growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 305-322, July.
  • Handle: RePEc:spr:joecth:v:6:y:1995:i:2:p:305-22
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