On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy

Stijepic, Denis (2017): On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy.

Abstract

Structural change is associated with high costs for the economy and the society ranging from environmental pollution to unemployment. We focus on the three-sector framework (related to agriculture, manufacturing and services) and assume that the structural change costs increase with the strength of structural change. We show that monotonous structural change paths are minimizing the structural change costs in this framework. By using this result and the (qualitative) stylized facts of structural change based on the theoretical and empirical literature consensus, we derive the cost-minimizing strategy for a developing country. We use these results to discuss some well-known structural/trade strategies.

• Item Type: MPRA Paper
• Language: English
• Keywords: employment; structure; transformation; industrial; structural; policy; costs; long run; geometry; vector; simplex; dynamic optimization; uncertainty; calculus of variations
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology; 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 > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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