Capital Deepening and Non-Balanced Economic Growth

Daron Acemoglu and Veronica Guerrieri

No 207, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share (despite the equilibrium reallocation of capital and labor away from that sector). We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb- Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. Finally, we construct and analyze a model of “nonbalanced endogenous growth,†which extends these results to an economy with endogenous and directed technical change, and demonstrates that non-balanced technological progress can be an equilibrium phenomenon

Keywords: capital deepening; endogenous growth; multi-sector growth; non-balanced (search for similar items in EconPapers)
JEL-codes: O30 O40 O41 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dev and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Related works:
Journal Article: Capital Deepening and Nonbalanced Economic Growth (2008)
Working Paper: Capital Deepening and Non-Balanced Economic Growth (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:207

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