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Supply Side Structural Change

Author

Listed:
  • Cordoba, Juan Carlos

Abstract

The interest rate and the rate of economic growth are often regarded as roughly constant as economies grow. Moreover, the share of agriculture in production and the share of rural population typically shrink. We show that an otherwise standard growth model that includes a backward and an advanced sector can account for these regularities. The mechanism works as follows: as the economy accumulates capital, labor flows from the backward sector to the advanced one. This migration prevents the usual diminishing marginal returns of capital. As a result, the interest rate and the growth rate of the economy remain constant during the transition to the steady state.

Suggested Citation

  • Cordoba, Juan Carlos, 2013. "Supply Side Structural Change," ISU General Staff Papers 201301010800001090, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201301010800001090
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    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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