Endogenous Growth in a Dependent Economy with Traded and Nontraded Capital

Stephen J Turnovsky

Review of International Economics, 1996, vol. 4, issue 3, 300-321

Abstract: The equilibrium growth path for this economy depends upon the relative sectoral capital intensities of the two production functions. If the nontraded sector is relatively intensive in traded capital, both the relative price of nontraded output and the price of installed capital always remain at their respective steady-state levels. Traded capital and aggregate wealth are always on their respective steady-state growth paths. Nontraded capital undergoes transitional dynamics, ultimately converging to the growth rate of the traded capital and an equilibrium ratio of traded to nontraded capital. If the sectoral intensities are reversed, both asset prices will follow transitional adjustment paths. Copyright 1996 by Blackwell Publishing Ltd.

Date: 1996
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