Economic Growth and Sectoral Change under Resource Reallocation Costs
A general growth model with explicit resource reallocation costs is set up. A new feature is the property of hysteresis (i.e. a continuum of stationary equilibria) in closed-economy growth models. Employing a linear model the hysteresis range and the consequences for the long-run growth rate are determined analytically. The most important conclusions are the following: (1) An economy’s long-run position may depend critically on the initial intersectoral allocation pattern as well as on the efficiency of the resource reallocation sector; (2) if we interpret the resource reallocation sector as a specific part of the education sector, there is a straightforward possibility for the government to reduce the range of hysteresis and hence the dependence on initial conditions; (3) international trade is an important device to overcome the negative consequences of high resource reallocation costs for long-run growth.
|Date of creation:||Dec 2003|
|Contact details of provider:|| Postal: Zürichbergstrasse 18, ZUE, CH-8092 Zürich|
Phone: +41 44 632 03 87
Fax: +41 44 632 13 62
Web page: http://www.cer.ethz.ch
More information through EDIRC
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.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-791, October.
- Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
- Francesco Giavazzi & Charles Wyplosz, 1984. "The Real Exchange Rate, the Current Account, and the Speed of Adjustment," NBER Chapters,in: Exchange Rate Theory and Practice, pages 335-356 National Bureau of Economic Research, Inc.
- Francesco Giavazzi & Wyplosz, "undated". "The Real Exchange Rate, the Current Account and the Speed of Adjustment," Rodney L. White Center for Financial Research Working Papers 13-82, Wharton School Rodney L. White Center for Financial Research.
- Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-698, June.
- Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
- Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
- Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
- Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-1038, October.
- Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
- Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers. Full references (including those not matched with items on IDEAS)