A Three Sector Growth Model in Which One Sector is Primary

2007

We study a multi-sector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation, and balanced aggregate growth. The conditions are weak restrictions on the utility and production functions. Along the balanced growth path, labor employed in the production of consumption goods gradually moves to the sector with the lowest TFP growth rate, until in the limit it is the only sector with nontrivial employment of this kind. The employment shares of intermediate and capital goods remain constant during the reallocation process. (JEL O41, O14, E29) Economic growth takes place at uneven rates across different sectors of the economy. This paper has two objectives related to this fact: (a) to derive the implications of different sectoral total factor productivity (TFP) growth rates for structural change, the name given to the shifts in industrial

Estudos Econômicos (São Paulo), 2015

With this inquiry, we seek to develop a disaggregated version of the post-Keynesian approach to economic growth, by showing that indeed it can be treated as a particular case of the Pasinettian model of structural change and economic expansion. By relying upon vertical integration it becomes possible to carry out the analysis initiated by Kaldor (1956) and Robinson (1956, 1962), and followed by Dutt (1984), Rowthorn (1982) and later Bhaduri and Marglin (1990) in a multi-sectoral model in which demand and productivity increase at different paces in each sector. By adopting this approach it is possible to show that the structural economic dynamics is conditioned not only to patterns of evolving demand and diffusion of technological progress but also to the distributive features of the economy, which can give rise to different regimes of economic growth. Besides, we find it possible to determine the natural rate of profit that makes the mark-up rate to be constant over time.

Economic Change and Restructuring, 2007

This paper studies the implications of a dynamic general equilibrium model with three production sectors, which are agriculture, industry and services. Due to the assumption of increasing returns in industry and services, our model has multiple equilibria. Two equilibria are stable: one, in which a country produces only agricultural goods and converges to a steady state, and the other, in which a country operates all three sectors and has positive unbalanced long-run growth by contracting agriculture and expanding industry and services. These predictions agree well with the real-world development experiences of rich and poor countries. In the context of our model, we also investigate the evolution of the sectorial composition in the transition countries and find that such countries move to the rich rather than to the poor world.

RePEc: Research Papers in Economics, 2010

With this inquiry, we seek to develop a disaggregated version of the post-Keynesian approach to economic growth, by showing that indeed it can be treated as a particular case of the Pasinettian model of structural change and economic expansion. By relying upon vertical integration it becomes possible to carry out the analysis initiated by Kaldor (1956) and Robinson (1956, 1962), and followed by Dutt (1984), Rowthorn (1982) and later Bhaduri and Marglin (1990) in a multi-sectoral model in which demand and productivity increase at different paces in each sector. By adopting this approach it is possible to show that the structural economic dynamics is conditioned not only to patterns of evolving demand and diffusion of technological progress but also to the distributive features of the economy, which can give rise to different regimes of economic growth. Besides, we find it possible to determine the natural rate of profit that makes the markup rate to be constant over time.

SSRN Electronic Journal, 2000

This paper introduces sectorial heterogeneity in TFPs in a growth model driven by an exogenous process of labor specialization to generate new insights on trade and economic growth. Despite the exogeneity of labor specialization, the overall economic growth rate in this model is endogenously determined and depends in a closed economy on the distribution of labor intensity across sectors. Our model could thus be labeled as a semi-endogenous growth model in the sense of Jones (1995). When the model is extended to allow for international trade, we find that the overall growth rate is unambiguously higher as the number of trading partners increases. There are two effects working in the same direction contributing to this result: the resource re-allocation effect and the total product-variety effect. On the other hand, the growth effect of the reduction in trade-related fixed cost is non-monotonic because the two effects work in opposite directions.

Energy, 2001

Conventional economic growth theory assumes that technological progress is exogenous and that resource consumption is a consequence, not a cause, of growth. This assumption is built into most, if not all, of the large-scale models used for policy guidance by governments. The reality is probably more complex. A 'growth engine' is a positive feedback loop involving declining costs and increasing demand. The neoclassical theory was based on population growth and the traditional savings-investment-capital accumulation mechanism. Solow added an exogenous residual called 'technical progress'. However, based on both qualitative and quantitative evidence, physical resource flows have been, and still remain, a major factor of production. Yet doubts remain because of the small share of direct payments to energy (and other natural resource) suppliers in the national accounts. This paper shows that the apparent inconsistency between (small) factor payments and the high correlation between physical resource (energy) inputs and outputs can be traced to an often forgotten simplification. The standard neoclassical growth model produces final products directly from labor and capital without allowing any role for consumable intermediates. Correcting for the omission of intermediates by introducing a two-sector or multi-sector production process multiplies the impact of primary resource inputs and accounts for the apparent inconsistency. 

Journal of Macroeconomics, 2022

This paper reexamines the possibility of endogenous long-term economic growth in neoclassical models with non-renewable resources. Instead of using a Cobb-Douglas production function as in most existing studies, we consider a general form in which physical capital is functionally separable from labour and natural resources. It is shown that if the elasticity of substitution between labour and resources is identical to one, then long-term economic growth is endogenous. But if this elasticity is not equal to one, as suggested by empirical studies, then long-term economic growth is entirely driven by an exogenous technological factor.

Review of Economic Dynamics, 2004

We construct a dynamic Heckscher-Ohlin model in which the initial distribution of production factors across economies makes factor price equalization impossible. The model produces dynamics similar to those of the neoclassical growth model. However, free trade prevents identically parameterized economies from achieving identical steady states. Although poor economies grow faster than rich economies during the transition to the steady state, the former do not catch up with the income per capita levels of the latter. A manycountry version of the model exempli…es the open-economy neoclassical growth model's ability to produce interesting distribution dynamics of income per capita.

Economica, 1970

Fulbright Review of Economics and Policy

PurposeThe principal aim of this paper is to review three basic theoretical growth models, namely the Harrod-Domar model, the Solow model and the Ramsey model, and examine their implications for economic policies.Design/methodology/approachThe paper utilizes a positivist research framework that emphasizes the causal relationships between the variables in each of the three models. Mathematical methods are employed to formulate and examine the three models under study. Since the paper is theoretical, it does not use any empirical data although numerical illustrations are provided whenever they are appropriate.FindingsThe Harrod-Domar model explains why countries with high rates of saving may also enjoy high rate of economic growth. Both the Solow and Ramsey models can be used to explain the medium-income trap. The paper examines the impact of Covid shocks on the macroeconomy. While the growth rate can be recovered, it may not always possible to recover the output level.Research limita...