Endogenous structural change, aggregate balanced growth, and optimality

Takeo Hori (), Noriko Mizutani () and Taisuke Uchino ()
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Takeo Hori: Tokyo Institute of Technology
Noriko Mizutani: Institute for Research on Household Economics
Taisuke Uchino: Daito Bunka University

Economic Theory, 2018, vol. 65, issue 1, No 6, 125-153

Abstract: Abstract Developed countries have experienced labor employment shifts from the manufacturing sector to the services sector, which is a process termed structural change. We construct a two-sector endogenous growth model of structural change in which knowledge spillover sustains growth. Our model is consistent with the empirically observed pattern of structural change as well as aggregate balanced growth. In both centralized and decentralized economies, labor employment shifts from a high productivity growth sector to a low productivity growth sector. Because of knowledge spillover, excessive labor is allocated to productivity improvements in the high productivity growth sector. Hence, the decentralized economy is characterized by rapid structural change compared to the optimal allocation.

Keywords: Structural change; Aggregate balanced growth; Endogenous growth; Optimal allocation (search for similar items in EconPapers)
JEL-codes: E1 O3 O4 O41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s00199-016-1012-1

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