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

  • Codrina Rada

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.

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File URL: http://www.un.org/esa/desa/papers/2007/wp44_2007.pdf
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Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 44.

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Length: 31 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:une:wpaper:44
Contact details of provider: Web page: http://www.un.org/en/development/desa/working-papers.html
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  13. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
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