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Endogenous Sector-Biased Technological Change and Industrial Policy

Berthold Herrendorf ()

No 105, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: We build a model of structural transformation with endogenous sector-biased technological change. We show that if the return to specialization is larger in the goods sector than in the service sector, then the equilibrium has the following properties: aggregate growth is balanced; the service sector receives more innovation but the goods sector experiences more productivity growth; structural transformation takes place from goods to services. Compared to the efficient allocation the laissez-faire equilibrium has too much labor in the goods sector, implying that optimal industrial policy should aim to increase, not decrease, the pace of structural transformation.

Date: 2016
New Economics Papers: this item is included in nep-dge, nep-gro and nep-ino
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Working Paper: Endogenous Sector-Biased Technological Change and Industrial Policy (2015) Downloads
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More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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