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Endowment structures, industrial dynamics, and economic growth

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

A growth model is developed to explain how the improvement in the endowment structure leads to industrial evolution in a closed developing economy. On the balanced growth path industries will endogenously upgrade toward the more capital-intensive ones in a continuous inverse-V-shaped pattern: As the capital-labor ratio reaches a certain threshold, a new industry appears, prospers, then declines and eventually replaced by a more capital-intensive industry, which also waxes and wanes in the same pattern, ad infinitum. Explicit solutions are obtained to fully characterize the whole dynamics of perpetual structural change and economic growth. Implications for industrial policies are discussed.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5055.

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Date of creation: 01 Sep 2009
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Handle: RePEc:wbk:wbrwps:5055
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