FACTOR ACCUMULATION AND GROWTH MIRACLES IN A TWO-SECTOR NEOCLASSICAL GROWTH MODEL

John Landon-Lane () and Peter Eric Robertson ()

Manchester School, 2009, vol. 77, issue 2, pages 153-170

Abstract: Countries that experience 'growth miracles' often exhibit rising investment rates and large intersectoral resource transfers. But how important are these factors to this process? We consider this question using a two-sector growth model with a segmented labour market. Numerical simulations show that a doubling of the investment rate can generate a significant intersectoral re-allocation of labour and can have a large impact on aggregate output per worker. Under our baseline parameter values, the effect of the investment rate on per capita incomes is amplified by 25-50 per cent, relative to a standard one-sector growth model. Copyright © 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.

Date: 2009

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