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

  • Harutaka, Takahshi
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    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).

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    File URL: https://mpra.ub.uni-muenchen.de/37297/1/MPRA_paper_37297.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37297.

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    Date of creation: 20 Feb 2012
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    Handle: RePEc:pra:mprapa:37297
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    1. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
    2. McKenzie, Lionel W., 1983. "Turnpike theory, discounted utility, and the von Neumann facet," Journal of Economic Theory, Elsevier, vol. 30(2), pages 330-352, August.
    3. McKenzie, Lionel W., 1979. "Optimal Economic Growth and Turnpike Theorems," Working Papers 267, California Institute of Technology, Division of the Humanities and Social Sciences.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    5. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
    6. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
    7. Araujo, A & Scheinkman, Jose A, 1977. "Smoothness, Comparative Dynamics, and the Turnpike Property," Econometrica, Econometric Society, vol. 45(3), pages 601-20, April.
    8. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
    9. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
    10. Makoto Yano, 1990. "Von neumann facets and the dynamic stability of perfect foresight equilibrium paths in neo-classical trade models," Journal of Economics, Springer, vol. 51(1), pages 27-69, February.
    11. Levhari, David & Liviatan, Nissan, 1972. "On stability in the saddle-point sense," Journal of Economic Theory, Elsevier, vol. 4(1), pages 88-93, February.
    12. Inada, Ken-ichi, 1971. "The Production Coefficient Matrix and the Stolper-Samuelson Condition," Econometrica, Econometric Society, vol. 39(2), pages 219-39, March.
    13. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
    14. Alexandre Scheinkman, Jose, 1976. "On optimal steady states of n-sector growth models when utility is discounted," Journal of Economic Theory, Elsevier, vol. 12(1), pages 11-30, February.
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