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An unbalanced two-sector growth model with constant returns:a turnpike approach

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  • Harutaka, Takahshi

Abstract

Recent industry-based empirical studies among countries demonstrate that individual industry's per capita capital stock and output grow at industry's own steady state growth rate. The industry growth rate is highly correlated to industry's technical progress measured by total factor productivity (TFP) of the industry, which exhibits large difference across industries as reported recently by Syverson (2011). Let us refer to this phenomenon as "unbalanced growth among industries." Very few researches concerned with this phenomenon have been done yet. Some exceptions are Echevarria (1997), Kongsamut, Rebelo and Xie (2001), and Acemoglu and Guerrieri (2008) among others. However their models and analytical methods are different from mine. Applying the theoretical method developed by McKenzie and Scheinkman in turnpike theory, I now construct a two-sector optimal growth model with an industry specific Hicks-neutral technical progress and show that each sector's per capita capital stock and output grow at the rate of the sector's technical progress (the sector’s TFP growth rate).

Suggested Citation

  • Harutaka, Takahshi, 2012. "An unbalanced two-sector growth model with constant returns:a turnpike approach," MPRA Paper 37297, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37297
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    References listed on IDEAS

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    More about this item

    Keywords

    two-sector optimal growth model; turnpike theory; unbalanced growth; TFP; the Hicks-neutral technical progress;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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