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The Stable Transformation Path

Author

Listed:
  • Francisco J. Buera
  • Joseph P. Kaboski
  • Martí Mestieri
  • Daniel G. O'Connor

Abstract

Dynamic models of structural transformation are often non-stationary, precluding balanced growth path (BGP) analysis. We develop a generalization of the BGP concept that we call a Stable Transformation Path (STraP). The STraP characterizes the medium-term dynamics of the economy in a turnpike sense; it is the non-stationary path toward which the economy (quickly) con- verges from an arbitrary initial capital stock. Calibrated simulations demonstrate that these medium-term dynamics have important quantitative implications for structural transformation, investment, and growth, including slow convergence. Medium-term dynamics alone account for the observed 40% secular decline in average growth rates across stages of development.

Suggested Citation

  • Francisco J. Buera & Joseph P. Kaboski & Martí Mestieri & Daniel G. O'Connor, 2020. "The Stable Transformation Path," NBER Working Papers 27731, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27731
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    Cited by:

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    3. Manuel García‐Santana & Josep Pijoan‐Mas & Lucciano Villacorta, 2021. "Investment Demand and Structural Change," Econometrica, Econometric Society, vol. 89(6), pages 2751-2785, November.
    4. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).

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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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