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Barriers and the Transition to Modern Growth

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  • L. Rachel Ngai

Abstract

This paper studies how differences in the size of barriers to capital accumulation can account for differences in long run economic development paths. In this model barriers affect both the beginning date and the pace of the modern economic growth. A fundamental property of the model is that cross country income differences matches the inverted U-shape pattern over time as observed in the data, hence implies a substantial fraction of existing income differences is really a transitional phenomenon. Relative to papers that model this as steady state phenomenon, my model requires a smaller size of barriers to account for current disparities. Another important finding is that this transitional effect increases significantly when I include the fact that today's low-income countries have had higher population growth rates during their early development stage than did the currently rich countries. In a quantitative exercise I find that given the beginning dates of modern growth, the model accounts for a significant portion of current income differences.

Suggested Citation

  • L. Rachel Ngai, 2003. "Barriers and the Transition to Modern Growth," CEP Discussion Papers dp0561, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0561
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    More about this item

    Keywords

    Industrialization; income disparity; distortion;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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