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Endowment Structure, Industrial Dynamics, and Economic Growth

  • Yong Wang

    (Hong Kong University of Science and Technology)

  • Justin Yifu Lin

    (the World Bank)

  • Jiandong Ju

    (Tsinghua University and University of Oklahoma)

A growth model is developed to explain how the improvement in the endowment structure leads to industrial evolution in a closed developing economy. On the balanced growth path industries will endogenously upgrade toward the more capital-intensive ones in a continuous inverse-V-shaped pattern: As the capital-labor ratio reaches a certain threshold, a new industry appears, prospers, then declines and eventually replaced by a more capital-intensive industry, which also waxes and wanes in the same pattern, ad infinitum. Explicit solutions are obtained to fully characterize the whole dynamics of perpetual structural change and economic growth. Implications for industrial policies are discussed.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 679.

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Date of creation: 2010
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Handle: RePEc:red:sed010:679
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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