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Sectoral Shift, Wealth Distribution, and Development

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  • Yuki, Kazuhiro

Abstract

There are two phenomena widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of its population. The question is why some economies have succeeded in such structural change, but others do not. In order to examine the question, an OLG model that explicitly takes into account the sectoral shift and human capital accumulation as sources of development is constructed. It is shown that, for a successful structural change, an economy must start with a wealth distribution that gives rise to an adequate size of 'middle class'. Once the economy initiates the 'take-off', the sectoral shift and human capital growth continue until it reaches the steady state with high income and equal distribution. However, when the productivity of the traditional sector is low, irrespective of the initial distribution and the productivity of the modern sector, it fails in the sectoral shift and ends up in one of steady states with low income and high inequality. Thus, sufficient productivity of the traditional sector is a prerequisite for development.

Suggested Citation

  • Yuki, Kazuhiro, 2007. "Sectoral Shift, Wealth Distribution, and Development," MPRA Paper 3384, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3384
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Azarnert, Leonid V., 2016. "Transportation Costs And The Great Divergence," Macroeconomic Dynamics, Cambridge University Press, vol. 20(01), pages 214-228, January.
    2. Dalila Nicet-Chenaf & Eric Rougier, 2009. "Human capital and structural change: how do they interact with each other in growth?," Post-Print hal-00389040, HAL.
    3. Yuki, Kazuhiro, 2016. "Education, Inequality, And Development In A Dual Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 20(01), pages 27-69, January.
    4. Keigo Nishida, 2014. "Agricultural productivity differences and credit market imperfections," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(8), pages 1262-1276, December.
    5. García-Díaz, César & Moreno-Monroy, Ana I., 2012. "Social influence, agent heterogeneity and the emergence of the urban informal sector," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1563-1574.
    6. Yuki, Kazuhiro, 2015. "Modernization, Social Identity, and Ethnic Conflict," MPRA Paper 67316, University Library of Munich, Germany.
    7. Yuki, Kazuhiro, 2012. "Stereotypes, segregation, and ethnic inequality," MPRA Paper 39704, University Library of Munich, Germany.
    8. Yuki, Kazuhiro, 2009. "Government and human capital in a model of development through modernization and specialization," MPRA Paper 19760, University Library of Munich, Germany.
    9. Ying Ma & Jing Li & Guansheng Yu & Dongyang Yuan, 2014. "Trade Openness, Economic Growth and the Vicissitude of Labor-intensive Industries: The Case of China," International Journal of Management and Economics, De Gruyter Open, vol. 43(1), pages 7-31, September.
    10. Yuki, Kazuhiro, 2007. "Urbanization, informal sector, and development," Journal of Development Economics, Elsevier, vol. 84(1), pages 76-103, September.
    11. Yuki, Kazuhiro, 2009. "Education, Signaling, and Wage Inequality in a Dynamic Economy," MPRA Paper 16982, University Library of Munich, Germany.

    More about this item

    Keywords

    Human capital; Sectoral shift; Structural change; Wealth distribution;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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