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Growth, Sectoral Composition, And The Wealth Of Nations

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  • Jaime Alonso-Carrera
  • Xavier Raurich

Abstract

This paper asserts that the endowments of production factors cause cross-country differences in GDP per capita by generating disparities in the sectoral composition. For that purpose, we characterize the dynamic equilibrium of a two-sector endogenous growth model with many consumption goods that are subject to minimum consumption requirements. In this model, economies with the same fundamentals but different endowments of capitals will end up growing at a common rate, although the long run level and sectoral composition of GDP will be different. Because the total factor productivity depends on sectoral structure, these differences in capital endowments will also generate sustained differences in the total factor productivities. Moreover, in our model the slope of the policy functions depends on the initial values of the capital stocks, which implies that the total factor productivities of economies with the same economic fundamentals may diverge along the transition.

Suggested Citation

  • Jaime Alonso-Carrera & Xavier Raurich, 2007. "Growth, Sectoral Composition, And The Wealth Of Nations," CAMA Working Papers 2007-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2007-15
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-02/15_alonso-carrera_raurich_2007.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alonso-Carrera, Jaime & Raurich, Xavier, 2010. "Growth, sectoral composition, and the evolution of income levels," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2440-2460, December.
    2. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2009. "Transitional Dynamics in an Endogenous Growth Model with Heterogeneous Consumption Goods," DEGIT Conference Papers c014_018, DEGIT, Dynamics, Economic Growth, and International Trade.
    3. Daniel Cardona & Fernando Sanchez Losada, 2007. "Cost-Based Models of Economic Growth," Working Papers in Economics 179, Universitat de Barcelona. Espai de Recerca en Economia.

    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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