A Theoretical Explanation of Some Stylized Facts of Economic Growth

Arvind Panagariya

The Quarterly Journal of Economics, 1988, vol. 103, issue 3, 509-526

Abstract: This paper presents a three-good, two-country, general equilibrium model that is consistent with several stylized facts of economic growth. The three goods are manufactures, agriculture, and services. Manufactures are subject to economies of scale. The model predicts that services, a nontraded good, must be more expensive in the country with higher per capita income. It also shows that as per capita income increases, we should expect the productivity in commodities relative to services to rise. The model is able to generate many other stylized facts of economic growth.

Date: 1988
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