STRUCTURAL CHANGE AND A CONSTANT GROWTH PATH IN A THREE-SECTOR GROWTH MODEL WITH THREE FACTORS

Kazunobu Muro

Macroeconomic Dynamics, 2017, vol. 21, issue 2, 406-438

Abstract: This study proposes the unified framework of a three-sector model with structural change where agriculture, manufacturing, and service sectors have different production technologies. All three sectors use the factors of capital, labor, and land as inputs. The constant-growth path (CGP), which is the trajectory along which the rental rate of capital remains constant, is used to reconcile the Kaldor and Kuznets facts, and plays a role in linking the wage rate and land rent in the three-factors model. Because the prices of agricultural goods and services are determined endogenously, the CGP condition is no longer the knife-edge condition. We find that the dynamic system along the CGP in the three-sector, three-factor model corresponds to the standard two-sector optimal growth model.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:21:y:2017:i:02:p:406-438_00

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