Endowment Structures, Industrial Dynamics, and Economic Growth
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This paper develops a dynamic general equilibrium model to explore industrial evolution and economic growth in a closed developing economy. The authors show that industries will endogenously upgrade toward the more capital-intensive ones as the capital endowment becomes more abundant. The model features a continuous inverse-V-shaped pattern of industrial evolution driven by capital accumulation: As the capital endowment reaches a certain threshold, a new industry appears, prospers, then declines and finally disappears. While the industry is declining, a more capital-intensive industry appears and booms, ad infinitum. Explicit solutions are obtained to fully characterize the whole dynamics of perpetual structural change and economic growth. Implications for industrial policies are discussed.
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ADJUSTMENT POLICIES, ADVANCED COUNTRIES, AGGREGATE LEVEL, AGGREGATE PRODUCTION FUNCTION, AGRICULTURE, ALLOCATION, ALLOCATION OF CAPITAL, BENCHMARK, BUDGET CONSTRAINT, CAPITAL ACCUMULATION, CAPITAL ALLOCATION, CAPITAL INTENSITIES, CAPITAL INTENSITY, CAPITAL LEVELS, CAPITAL REQUIREMENT, CAPITAL SHARE, CAPITAL SHARES, CAPITAL STOCK, CAPITAL-LABOR, CAPITAL-LABOR RATIO, CAPITALISM, CLOSED ECONOMY, COMMODITIES, COMMODITY, COMPARATIVE ADVANTAGE, COMPARATIVE ADVANTAGES, CONSTANT RATE, CONSTANT RETURNS, CONSTANT RETURNS TO SCALE, CONSUMERS, CONSUMPTION GOODS, DEMOCRACY, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPING ECONOMY, DEVELOPMENT ECONOMICS, DEVELOPMENT PATH, DEVELOPMENT POLICIES, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, DEVELOPMENT STRATEGY, DISCOUNT RATE, DISTRIBUTION OF INCOME, DOMESTIC MARKET, DYNAMIC ANALYSIS, DYNAMIC ECONOMY, DYNAMIC MODEL, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC THEORY, ELASTICITY, ELASTICITY OF SUBSTITUTION, EQUILIBRIUM, EXPENDITURE, EXTERNALITIES, EXTERNALITY, FACTION, FULL EMPLOYMENT, FUNCTIONAL FORMS, FUTURE RESEARCH, GDP, GROWTH LITERATURE, GROWTH MODEL, GROWTH MODELS, GROWTH PATH, GROWTH RATE, GROWTH RATES, HUMAN CAPITAL, INCOME, INDUSTRIAL COUNTRIES, INDUSTRIALIZATION, INTANGIBLE, INTERMEDIATE GOODS, INTERNATIONAL BANK, INTERNATIONAL INVESTMENT, INTERNATIONAL TRADE, INVESTMENT DECISIONS, LOW-INCOME COUNTRY, MACROECONOMIC POLICIES, MACROECONOMICS, MANUFACTURING INDUSTRIES, MARGINAL UTILITY, MODEL OF GROWTH, MONOPOLY, MULTIPLIERS, NATURAL RESOURCES, OPEN ECONOMIES, OPEN ECONOMY, OPTIMIZATION, OUTPUT RATIO, PER CAPITA INCOME, POLITICAL ECONOMY, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTION STRUCTURE, PRODUCTION STRUCTURES, PRODUCTIVITY, PRODUCTIVITY GROWTH, REAL INTEREST, REAL INTEREST RATE, RELATIVE PRICES, RENTAL PRICE OF CAPITAL, RETURN, SAVINGS, SECTOR MODEL, SHARE OF LABOR, SMALL ECONOMY, SOCIAL DEVELOPMENT, SOCIALISM, SPECIALIZATION, STATIC EQUILIBRIUM, STRUCTURAL CHANGE, SUSTAINABLE GROWTH, TECHNOLOGICAL CHANGE, TECHNOLOGICAL INNOVATION, TECHNOLOGY TRANSFER, TFP, TOTAL CONSUMPTION, TOTAL OUTPUT, USE OF CAPITAL, UTILITY FUNCTION, WEALTH, WEALTH OF NATIONS