Transition Dynamics in the Neoclassical Growth Model: The Case of South Korea

Yongsung Chang and Andreas Hornstein

No 565, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: Many cases of successful economic development, such as South Korea, exhibit long periods of sustained capital accumulation rates. This empirical feature is at odds with the standard neoclassical growth model which predicts initially high and then declining capital accumulation rates. We show that minor modifications of the neoclassical model go a long way towards accounting for the transition dynamics of the South Korean economy. Our modifications recognize that (1) agriculture essentially does not use reproducible capital, and that during the transition period (2) the relative price of capital declines substantially, and (3) the nonfarm employment share increases substantially.

Keywords: neoclassical growth model; transition dynamics; industrialization; price of capital; South Korea (search for similar items in EconPapers)
JEL-codes: E13 E22 O11 O13 O14 O16 O4 O53 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-07
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Transition dynamics in the neoclassical growth model: the case of South Korea (2015)
Working Paper: Transition dynamics in the neoclassical growth model: the case of South Korea (2011)
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