FACTOR ACCUMULATION AND GROWTH MIRACLES IN A TWO-SECTOR NEOCLASSICAL GROWTH MODEL

Countries that experience ‘growth miracles’ often exhibit rising investment rates and large intersectoral resource transfers. But how important are these factors to this process? We consider this question using a two‐sector growth model with a segmented labour market. Numerical simulations show that...

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Bibliographic Details
Published in:The Manchester school 2009-03, Vol.77 (2), p.153-170
Main Authors: LANDON-LANE, JOHN S., ROBERTSON, PETER E.
Format: Article
Language:English
Subjects:
Economic growth
Factor choice
Factor prices
Growth models
Income
Investment
Labor market
Output rate
Simulation
Studies
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Summary:Countries that experience ‘growth miracles’ often exhibit rising investment rates and large intersectoral resource transfers. But how important are these factors to this process? We consider this question using a two‐sector growth model with a segmented labour market. Numerical simulations show that a doubling of the investment rate can generate a significant intersectoral re‐allocation of labour and can have a large impact on aggregate output per worker. Under our baseline parameter values, the effect of the investment rate on per capita incomes is amplified by 25–50 per cent, relative to a standard one‐sector growth model.
ISSN:1463-6786
1467-9957
DOI:10.1111/j.1467-9957.2008.02092.x