Demand-based structural change and balanced economic growth

Jaime Alonso-Carrera () and Xavier Raurich

No 2014/303, UB School of Economics Working Papers from University of Barcelona School of Economics

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 exhibt 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 aconsequence, these economies end up exhibiting balanced growth of aggregate variables, while there is structural change. In contrast, initially poor economie ssuffer from an initially large intensity of the minimum consumption requirements, which makes the growth of the aggregate variables unbalanced during a very large perid.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)
Pages: 27 pages
Date: 2014
New Economics Papers: this item is included in nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Demand-based structural change and balanced economic growth (2015)
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