The Dynamic Process of Economic Takeoff and Industrial Transformation

Ming-Jen Chang, Ping Wang and Danyang Xie
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Ming-Jen Chang: Department of Economics, National Dong Hwa University, Hualien 97401, Taiwan, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2016, vol. 11, issue 1, 60-87

Abstract: This paper studies the patterns and key determinants of staged economic development. We construct a two-sector dynamic general equilibrium model populated with one-period lived non-overlapping generations, featuring endogenous enhancement in modern technology and endogenous accumulation of labor skills and capital funds. We consider preference biases toward the traditional sector of necessities, capital barriers to the modern sector, and imperfect substitution between skilled and unskilled workers. By calibrating the model to fit historic U.S. development, we find that modern technologies, saving incentives and capital scales/barriers are the most important determinants of the takeoff time. By evaluating the process of economic development, we identify that what shapes saving incentives is most crucial for the speed of modernization after taking off. We further establish that labor, capital and output are most responsive to the initial state of modern technologies, but least responsive to skill endowments, along the dynamic transition path.

Keywords: economic takeoff; industrial transformation; endogenous skill; technological advancements; saving incentives; preference biases; capital barriers (search for similar items in EconPapers)
JEL-codes: C33 C41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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http://journal.hep.com.cn/fec/EN/10.3868/s060-005-016-0005-3 (application/pdf)

Related works:
Working Paper: The dynamic process of economic takeoff and industrial transformation (2011)
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