Demand-based structural change and balanced economic growth
Jaime Alonso-Carrera and
Xavier Raurich
Journal of Macroeconomics, 2015, vol. 46, issue C, 359-374
Abstract:
We analyze the equilibrium of a multi-sector exogenous growth model where the introduction of minimum consumption requirements drives structural change. We show that equilibrium dynamics simultaneously exhibit structural change and balanced growth of aggregate variables as is observed in US when the initial intensity of minimum consumption requirements is sufficiently small. This intensity is measured by the ratio between the aggregate value of the minimum consumption requirements and GDP and, therefore, it is inversely related with the level of economic development. Initially rich economies benefit from an initially low intensity of the minimum consumption requirements and, as a consequence, these economies end up exhibiting balanced growth of aggregate variables, while there is structural change. In contrast, initially poor economies suffer from an initially large intensity of the minimum consumption requirements, which makes the growth of the aggregate variables unbalanced during a very large period. These economies may never exhibit simultaneously balanced growth of aggregate variables and structural change.
Keywords: Structural change; Non-homothetic preferences; Balanced growth; Speed of convergence (search for similar items in EconPapers)
JEL-codes: O41 O47 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (17)
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Working Paper: Demand-based structural change and balanced economic growth (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:46:y:2015:i:c:p:359-374
DOI: 10.1016/j.jmacro.2015.10.005
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