Economics at your fingertips  

Supply Side Structural Change

Juan Cordoba

GE, Growth, Math methods from University Library of Munich, Germany

Abstract: The interest rate and the rate of economic growth are often regarded as roughly constant as economies grow. Moreover, the agricultural sector and rural population typically shrink. We show that an otherwise standard growth model that includes a backward and an advanced sector can account for these regularities. The mechanism works as follows: as the economy accumulates capital, labor flows from the backward sector to the advanced one. This migration prevents the usual diminishing marginal returns of capital. As a result, the interest rate and the growth rate of the economy remain constant during the transition to the steady state. The model predicts that developed countries must experience a sudden slowdown in their growth rates once the backward sector fully disappears. Productivity, as measured by the Solow residuals, also must slow down. Cross-country evidence supports these predictions of the model

Keywords: Growth; Structural Change; Urbanization; Choice of Techniques; Productivity Slowdown (search for similar items in EconPapers)
JEL-codes: O14 O15 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2002-11-21
New Economics Papers: this item is included in nep-dev
Note: Type of Document - pdf; pages: 38 ; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Supply Side Structural Change (2013) Downloads
Working Paper: Supply Side Structural Change (2002) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in GE, Growth, Math methods from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().

Page updated 2020-02-23
Handle: RePEc:wpa:wuwpge:0211002