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A Note on Barriers to Capital Accumulation and Income

  • John Landon-Lane

    ()

    (Rutgers University)

  • Peter Robertson

    ()

    (The Unviersity of New South Wales)

In this paper we clarify the impact that barriers to capital accumulation can have on a two-sector neoclassical growth model's ability to explain the observed differences in incomes across countries. We show that the effect of barriers to technology adoption in a two sector model is necessarily identical to a one-sector model when there are no factor market imperfections and each sector has identical technologies. We also show that this result generalizes to the case when the technologies are different across the sectors.

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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200509.

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Date of creation: 10 Nov 2005
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Handle: RePEc:rut:rutres:200509
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  1. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," EPRU Working Paper Series 03-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series 1215, The World Bank.
  3. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
  4. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
  5. Parente, Stephen L. & Prescott, Edward C., 2005. "A Unified Theory of the Evolution of International Income Levels," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 21, pages 1371-1416 Elsevier.
  6. John Landon-Lane & Peter Robertson, 2005. "Barriers to Accumulation and Productivity Differences in a Two Sector Growth Model," Departmental Working Papers 200510, Rutgers University, Department of Economics.
  7. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
  8. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  9. Diego Restuccia, 2002. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," Working Papers diegor-02-01, University of Toronto, Department of Economics.
  10. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
  11. Robertson, Peter E, 1999. "Economic Growth and the Return to Capital in Developing Economies," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 577-94, October.
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