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Demand-based structural change and balanced economic growth

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We analyze the equilibrium of a multi-sector exogenous growth model where the introduction of minimum consumption requirements drives structural change. We show that equilibrium dynamics simultaneously exhibt structural change and balanced growth of aggregate variables as is observed in US when the initial intensity of minimum consumption requirements is sufficiently small. This intensity is measured by the ratio between the aggregate value of the minimum consumption requirements and GDP and, therefore, it is inversely related with the level of economic development. Initially rich economies benefit from an initially low intensity of the minimum consumption requirements and, as aconsequence, these economies end up exhibiting balanced growth of aggregate variables, while there is structural change. In contrast, initially poor economie ssuffer from an initially large intensity of the minimum consumption requirements, which makes the growth of the aggregate variables unbalanced during a very large perid.These economies may never exhibit simultaneously balanced growth of aggregate variables and structural change

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  • Jaime Alonso-Carrera & Xavier Raurich, 2014. "Demand-based structural change and balanced economic growth," UB School of Economics Working Papers 2014/303, University of Barcelona School of Economics.
  • Handle: RePEc:ewp:wpaper:303web
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    8. Christian Ghiglino & Kazuo Nishimura & Alain Venditti, 2018. "Non-Balanced Endogenous Growth and Structural Change: When Romer Meets Kaldor and Kuznets," AMSE Working Papers 1831, Aix-Marseille School of Economics, France.
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    More about this item

    Keywords

    Structural change; non-homothetic preferences; Balanced growth; Speed of convergence.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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