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The Magnification of a Lagging Region's Initial Economic Disadvantages on the Balanced Growth Path

Amitrajeet Batabyal () and Peter Nijkamp

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze aspects of long run economic growth in stylized lagging and leading regions. Both regions use physical capital, research and development (R&D), and knowledgeable workers to produce a final consumption good. The lagging region faces two key economic disadvantages. Specifically, the constant fractions of the output of the final consumption good that are saved to enhance the stocks of physical capital and R&D are assumed to be twice as large in the leading region as they are in the lagging region. In this scenario, we perform three tasks. First, we determine the ratio of the balanced growth path (BGP) value of output per knowledgeable worker in the leading region to its value in the lagging region. Second, we ascertain the ratio of the BGP value of R&D per knowledgeable worker in the leading region to its value in the lagging region. Finally, we show the extent to which the lagging region’s initial economic disadvantages are magnified on the BGP and then discuss some policy implications.

Keywords: Economic Growth; Lagging Region; Leading Region; Magnification Effect (search for similar items in EconPapers)
JEL-codes: O18 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-gro and nep-ure
Date: 2019-01-15, Revised 2019-03-09
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