International capital mobility and structural transformation

Kim Kyungsoo, Oh Wankeun and E. Young Song ()
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Kim Kyungsoo: Department of Economics, Sungkyunkwan University, Seoul 03063, Korea
Oh Wankeun: Department of Economics, Hankuk University of Foreign Studies, Seoul 024501, Korea

The B.E. Journal of Macroeconomics, 2019, vol. 19, issue 1, 11

Abstract: This study examines the role of international capital mobility in shaping the relation between economic growth and structural transformation. We build a small open economy Ramsey model with two goods, tradables and nontradables. We show that if the long-run autarky interest rate of a small open economy is higher than the world interest rate, the employment and value-added shares of the tradables sector will rise over time. In the opposite case, the shares will fall. Because the autarky interest rate increases with the rate of technological progress, our result suggests that cross-country differences in the rate of technological progress may be a significant factor in accounting for diverse patterns of structural changes among countries.

Keywords: capital mobility; financial integration; industrialization; structural transformation; trade imbalance (search for similar items in EconPapers)
JEL-codes: F21 F43 O41 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/bejm-2017-0089

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