Capital Deepening and Non-Balanced Economic Growth

Daron Acemoglu and Veronica Guerrieri

No 12475, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share, but simultaneously induces a reallocation of capital and labor away from that sector. We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb-Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. We also show that for realistic parameter values, the model generates dynamics that are broadly consistent with US data. In particular, the model generates more rapid growth of employment in less capital-intensive sectors, more rapid growth of real output in more capital-intensive sectors and aggregate behavior in line with the Kaldor facts. Finally, we construct and analyze a model of “non-balanced endogenous growth,†which extends the main results of the paper to an economy with endogenous anddirected technical change. This model shows that equilibrium will typically involve endogenous non-balanced technological progress.

JEL-codes: O30 O40 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-dge
Date: 2006-08
Note: EFG
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w12475.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Capital Deepening and Non-Balanced Economic Growth (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w12475
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().