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|
|Date of revision:|
|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
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.:
- Sergio T. Rebelo, 1990.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- Francesco Giavazzi & Charles Wyplosz, 1984.
"The Real Exchange Rate, the Current Account, and the Speed of Adjustment,"
in: Exchange Rate Theory and Practice, pages 335-356
National Bureau of Economic Research, Inc.
- Francesco Giavazzi & Wyplosz, . "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.
- Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- 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 1008-38, October.
- 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 649-98, June.
- Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
- Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
When requesting a correction, please mention this item's handle: RePEc:eth:wpswif:03-30. 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: ()
If references are entirely missing, you can add them using this form.