A model of unbalanced sectorial growth with application to transition economies |
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Authors: | Dmytro Kylymnyuk Lilia Maliar Serguei Maliar |
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Institution: | (1) University of Toulouse, Toulouse, France;(2) Departamento de Fundamentos del Análisis Económico, Universidad de Alicante, Campus San Vicente del Raspeig, Ap. Correos 99, 03080 Alicante, Spain |
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Abstract: | This paper studies the implications of a dynamic general equilibrium model with three production sectors, which are agriculture,
industry and services. Due to the assumption of increasing returns, our model has multiple equilibria. There are two stable
equilibria: one, in which a country produces only agricultural goods and converges to a steady state, and the other, in which
a country operates all three sectors and has positive unbalanced long-run growth with contracting agriculture and expanding
industry and services. These predictions agree well with the real-world development experiences of rich and poor countries.
In the context of our model, we also investigate the evolution of the sectorial composition in the transition countries and
find that such countries move to the rich rather than to the poor world.
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Keywords: | Growth model Increasing returns to scale Agriculture Industry Services Multiple equilibria Transition economies |
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