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A growth model for a two-sector economy with endogenous productivity

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  • Codrina Rada

Abstract

A growth model is developed for an open dual economy. The economy expands due to a higher growth rate of labour productivity in the modern sector through the Kaldor-Verdoorn channel and higher effective demand through a Keynesian channel. The model incorporates a retardation mechanism affecting the slopes of productivity and output growth schedules as labour surplus and economies of scale diminish. A wage or profit-led regime and initial conditions may give rise to: de-industrialization in terms of both output and employment; a growth trap sustaining a situation of structural heterogeneity; or sustainable employment and adequate output and productivity growth.

Suggested Citation

  • Codrina Rada, 2007. "A growth model for a two-sector economy with endogenous productivity," Working Papers 44, United Nations, Department of Economics and Social Affairs.
  • Handle: RePEc:une:wpaper:44
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    File URL: http://www.un.org/esa/desa/papers/2007/wp44_2007.pdf
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    References listed on IDEAS

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    7. John W. Mellor, 1963. "The Use and Productivity of Farm Family Labor in Early Stages of Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 45(3), pages 517-534.
    8. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," Review of Economic Studies, Oxford University Press, vol. 23(2), pages 83-100.
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    10. Morley, S. & Vos, R.P., 2004. "Bad luck or wrong policies? : external shocks, domestic adjustment, and the growth slowdown in Latin America and the Carribean," ISS Working Papers - General Series 19156, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
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    17. Codrina Rada & Lance Taylor, 2006. "Developing and Transition Economies in the Late 20th Century: Diverging Growth Rates, Economic Structures, and Sources of Demand," Working Papers 34, United Nations, Department of Economics and Social Affairs.
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    Cited by:

    1. Viego, Valentina, 2010. "Rendimientos crecientes, costos de transporte, eslabonamientos verticales y asimetrías regionales persistentes
      [Increasing returns, transport costs, vertical linkages and persistent regional inequa
      ," MPRA Paper 26881, University Library of Munich, Germany, revised 04 Aug 2010.
    2. Ocampo, José Antonio & Parra, María Angela, 2007. "The dual divergence: growth successes and collapses in the developing world since 1980," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1938, December.
    3. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.
    4. Lance Taylor, 2009. "Growth, Development Policy,Job Creation and Poverty Reduction," Working Papers 90, United Nations, Department of Economics and Social Affairs.

    More about this item

    Keywords

    productivity growth; two sector growth models; demand-led growth;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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