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Specialization on a technologically atagnant aector need not be bad for growth

This paper presents a simple North-South model of endogenous growth, based on learning by doing, which is consistent with the following empirical observations: (i) the price of investment goods relative to consumption goods has been falling for the last 40 years in most industrialized countries, (ii) poor countries are net importers of investment equipment and (iii) after a period of initial convergence, the sample of open economies exhibits remarkable stability of the per capita income distribution. In contrast to the research tradition started by Lucas (1988), in the proposed model, specialization on the technologically stagnant consumption sector does not entail a growth penalty.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2004-02.

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Date of creation: Mar 2004
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Handle: RePEc:jku:econwp:2004_02
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  1. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
  2. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
  3. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied technological change learning-by-doing and the productivity slowdown," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. 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.
  5. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  7. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  10. Felbermayr Gabriel J & Licandro Omar, 2005. "The Underestimated Virtues of the Two-sector AK Model," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-19, September.
  11. Maurice Obstfeld & Alan M. Taylor, 2003. "Globalization and Capital Markets," NBER Chapters, in: Globalization in Historical Perspective, pages 121-188 National Bureau of Economic Research, Inc.
  12. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
  13. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-43, November.
  14. Nancy L. Stokey, 1991. "Human Capital, Product Quality, and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 587-616.
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