Endowment Structures, Industrial Dynamics, and Economic Growth

From:
Department for International Development
Published
1 January 2009
Document Type:
Working Paper
Theme:
Economic Growth
Authors:
Lin, J.Y., Ju Jiandong, Wang Yong

Abstract

This 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.

Citation

Ju Jiandong; Lin, J.Y.; Wang Yong. Endowment Structures, Industrial Dynamics, and Economic Growth. The World Bank, Washington DC, USA (2009) 40 pp.

Published 1 January 2009
Contents