An Unbalanced Multi-industry Growth Model with Constant Returns: A Turnpike Approach

Takahashi, Harutaka (2010): An Unbalanced Multi-industry Growth Model with Constant Returns: A Turnpike Approach.

Abstract

Recent industry-based empirical studies among countries demonstrate that individual industry's per capita capital stock and output grow at industry's own steady state growth rate. The industry growth rate is highly correlated to industry's technical progress measured by total factor productivity TFP) of the industry. Let us refer to this phenomenon as "unbalanced growth among industries." Very few research concerned with this phenomenon has been done yet. Some exceptions are Echevarria (1997), Kongsamut, Rebelo and Xie (2001), and Acemoglu and Guerrieri (2008) among others. However their models and analytical methods are different from mine. Applying the theoretical method developed by McKenzie and Scheinkman in turnpike theory, I now construct a multi-sector optimal growth model with a industry specific Hicks-neutral technical progress and show that each sector's per capita capital stock and output grow at the rate of the sector's technical progress.

• Item Type: MPRA Paper
• Language: English
• Keywords: multisector growth model;optimal growth; turnpike theory
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O21 - Planning Models ; Planning Policy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development

References

Acemoglu, D. and V. Guerrieri (2008) "Capital deepe ning and nonbalanced economic growth," Journal of Political Economy 116, 467-498.

Benhabib, J. and K. Nishimura (1979) "On the uniqueness of steady state in an economy with heterogeneous capital goods," International Economic Review 20, 59-81.