2026-07-01http://hdl.handle.net/123456789/417117This 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.application/pdftext/plainCC BY 3.0 IGOhttp://creativecommons.org/licenses/by/3.0/igo/World BankADJUSTMENT POLICIESADVANCED COUNTRIESAGGREGATE LEVELAGGREGATE PRODUCTION FUNCTIONAGRICULTUREALLOCATIONALLOCATION OF CAPITALBENCHMARKBUDGET CONSTRAINTCAPITAL ACCUMULATIONCAPITAL ALLOCATIONCAPITAL INTENSITIESCAPITAL INTENSITYCAPITAL LEVELSCAPITAL REQUIREMENTCAPITAL SHARECAPITAL SHARESCAPITAL STOCKCAPITAL-LABORCAPITAL-LABOR RATIOCAPITALISMCLOSED ECONOMYCOMMODITIESCOMMODITYCOMPARATIVE ADVANTAGECOMPARATIVE ADVANTAGESCONSTANT RATECONSTANT RETURNSCONSTANT RETURNS TO SCALECONSUMERSCONSUMPTION GOODSDEMOCRACYDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDEVELOPING ECONOMYDEVELOPMENT ECONOMICSDEVELOPMENT PATHDEVELOPMENT POLICIESDEVELOPMENT POLICYDEVELOPMENT STRATEGIESDEVELOPMENT STRATEGYDISCOUNT RATEDISTRIBUTION OF INCOMEDOMESTIC MARKETDYNAMIC ANALYSISDYNAMIC ECONOMYDYNAMIC MODELECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC THEORYELASTICITYELASTICITY OF SUBSTITUTIONEQUILIBRIUMEXPENDITUREEXTERNALITIESEXTERNALITYFACTIONFULL EMPLOYMENTFUNCTIONAL FORMSFUTURE RESEARCHGDPGROWTH LITERATUREGROWTH MODELGROWTH MODELSGROWTH PATHGROWTH RATEGROWTH RATESHUMAN CAPITALINCOMEINDUSTRIAL COUNTRIESINDUSTRIALIZATIONINTANGIBLEINTERMEDIATE GOODSINTERNATIONAL BANKINTERNATIONAL INVESTMENTINTERNATIONAL TRADEINVESTMENT DECISIONSLOW-INCOME COUNTRYMACROECONOMIC POLICIESMACROECONOMICSMANUFACTURING INDUSTRIESMARGINAL UTILITYMODEL OF GROWTHMONOPOLYMULTIPLIERSNATURAL RESOURCESOPEN ECONOMIESOPEN ECONOMYOPTIMIZATIONOUTPUT RATIOPER CAPITA INCOMEPOLITICAL ECONOMYPRODUCTION FUNCTIONPRODUCTION FUNCTIONSPRODUCTION STRUCTUREPRODUCTION STRUCTURESPRODUCTIVITYPRODUCTIVITY GROWTHREAL INTERESTREAL INTEREST RATERELATIVE PRICESRENTAL PRICE OF CAPITALRETURNSAVINGSSECTOR MODELSHARE OF LABORSMALL ECONOMYSOCIAL DEVELOPMENTSOCIALISMSPECIALIZATIONSTATIC EQUILIBRIUMSTRUCTURAL CHANGESUSTAINABLE GROWTHTECHNOLOGICAL CHANGETECHNOLOGICAL INNOVATIONTECHNOLOGY TRANSFERTFPTOTAL CONSUMPTIONTOTAL OUTPUTUSE OF CAPITALUTILITY FUNCTIONWEALTHWEALTH OF NATIONS