Sectoral composition and macroeconomic dynamics
We analyze the transitional dynamics of a model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the typical diminishing returns to capital and the sectoral change inducing the variation in relative prices. We show that this second force affects the growth rate if the two consumption goods are not Edgeworth independent and if these two goods are pro- duced with technologies exhibiting different capital intensities. Because the afore- mentioned dynamic sectoral change arises only under heterogeneous consumption goods, the transitional dynamics of this model exhibits striking differences with the growth model with a single consumption good. We also show that these differences in the transitional dynamics can give raise to large discrepancies in the welfare cost of shocks between the economy with a unique consumption good and the economy with multiple consumption goods.
|Date of creation:||05 Apr 2011|
|Contact details of provider:|| Postal: 08193, Bellaterra, Barcelona|
Phone: 34 93 592 1203
Fax: +34 93 542-1223
Web page: http://pareto.uab.cat
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004.
"Habit Formation, Catching Up with the Joneses, and Economic Growth,"
Journal of Economic Growth,
Springer, vol. 9(1), pages 47-80, 03.
- Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Working Papers UWEC-2004-09-P, University of Washington, Department of Economics, revised Jan 2004.
- Daron Acemoglu & Veronica Guerrieri, 2006.
"Capital Deepening and Non-Balanced Economic Growth,"
NBER Working Papers
12475, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
- Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
- Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 67-92, June.
When requesting a correction, please mention this item's handle: RePEc:aub:autbar:869.11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Xavier Vila)
If references are entirely missing, you can add them using this form.