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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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  12. Pritchett, Lant, 2000. "Understanding Patterns of Economic Growth: Searching for Hills among Plateaus, Mountains, and Plains," World Bank Economic Review, World Bank Group, vol. 14(2), pages 221-50, May.
  13. Brown, Alan & Deaton, Angus S, 1972. "Surveys in Applied Economics: Models of Consumer Behaviour," Economic Journal, Royal Economic Society, vol. 82(328), pages 1145-1236, December.
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