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Specialization on a Technologically Stagnant Sector Need Not Be Bad for Growth

  • Felbermayr, Gabriel J.

This paper presents a simple North-South model of endogenous growth, based on learning by doing, which is consistent with the following empirical observations: (i) the price of investment goods relative to consumption goods has been falling for the last 40 years in most industrialized countries, (ii) poor countries are net importers of investment equipment and (iii) after a period of initial convergence, the sample of open economies exhibits remarkable stability of the per capita income distribution. In contrast to the research tradition started by Lucas (1988), in the proposed model, specialization on the technologically stagnant consumption sector does not entail a growth penalty.

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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 24.

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Date of creation: 2004
Date of revision:
Handle: RePEc:zbw:cegedp:24
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  1. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  2. Zhiqi Chen, 1992. "Long-Run Equilibria in a Dynamic Heckscher-Ohlin Model," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 923-43, November.
  3. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  4. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
  5. Maurice Obstfeld & Alan M. Taylor, 2002. "Globalization and Capital Markets," NBER Working Papers 8846, National Bureau of Economic Research, Inc.
  6. repec:tpr:qjecon:v:106:y:1991:i:2:p:587-616 is not listed on IDEAS
  7. Raouf Boucekkine & Fernando del Río & Omar Licandro, 2003. "Embodied Technological Change, Learning-by-doing and the Productivity Slowdown," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 87-98, 03.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. repec:tpr:qjecon:v:114:y:1999:i:1:p:83-116 is not listed on IDEAS
  10. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  11. Gabriel J. FELBERMAYR & Omar LICANDRO, 2002. "The Under-Estimated Virtues of the Two-Sector AK Model," Economics Working Papers ECO2002/27, European University Institute.
  12. Nancy L. Stokey, 1990. "Human Capital, Product Quality, And Growth," NBER Working Papers 3413, National Bureau of Economic Research, Inc.
  13. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
  14. repec:tpr:qjecon:v:112:y:1997:i:1:p:57-84 is not listed on IDEAS
  15. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
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