Endogenous Sector-Biased Technological Change and Industrial Policy
Berthold Herrendorf ()
No 105, 2016 Meeting Papers from Society for Economic Dynamics
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.
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Working Paper: Endogenous Sector-Biased Technological Change and Industrial Policy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:105
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