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Barriers to Accumulation and Productivity Differences in a Two Sector Growth Model

Author

Listed:
  • John Landon-Lane

    () (Rutgers University)

  • Peter Robertson

    () (The Unviersity of New South Wales)

Abstract

Barriers to investment are often regarded as an important determinant of the variation in international income levels. Nevertheless, in the standard neoclassical growth model, these barriers have only have small effects on per capita incomes. We consider the effects of barriers to accumulation in a two-sector neoclassical model that also exhibits barriers to labor mobility. Numerical simulation show that barriers to accumulation have a magnified effect in this model. The results imply that if labor markets are not efficient, then barriers to accumulation may be an important determinant of a country's income level. Moreover, we show that the removal of these barriers can produce several decades of rapid growth, reminiscent of economic growth miracles.

Suggested Citation

  • 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.
  • Handle: RePEc:rut:rutres:200510
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    File URL: http://www.sas.rutgers.edu/virtual/snde/wp/2005-10.pdf
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    Cited by:

    1. Areendam Chanda & Carl-Johan Dalgaard, 2008. "Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography," Economica, London School of Economics and Political Science, vol. 75(300), pages 629-661, November.
    2. John Landon-Lane & Peter Robertson, 2005. "A Note on Barriers to Capital Accumulation and Income," Departmental Working Papers 200509, Rutgers University, Department of Economics.

    More about this item

    Keywords

    Barriers; Development; Dual economies; Growth; Wage gaps;

    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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