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Endowment structures, industrial dynamics, and economic growth

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  • Ju, Jiandong
  • Lin, Justin Yifu
  • Wang, Yong

Abstract

Motivated by four stylized facts about industry dynamics, we propose a theory of endowment-driven structural change by developing a tractable growth model with infinite industries. The aggregate economy in the model still follows the Kaldor facts, but the composition of the underlying industries changes endogenously over time. Each industry exhibits a hump-shaped life cycle: as capital reaches a certain threshold level, a new industry appears, prospers, and then declines, to be gradually replaced by a more capital-intensive industry, ad infinitum. Analytical solutions are obtained to characterize the life cycle of each industry and the perpetual structural change.
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  • Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2009. "Endowment structures, industrial dynamics, and economic growth," Policy Research Working Paper Series 5055, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5055
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    Keywords

    Economic Theory&Research; Political Economy; Economic Growth; Debt Markets; Emerging Markets;
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