Cross-country income differences in an open-economy two-sector growth model with specific factors

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Title: Cross-country income differences in an open-economy two-sector growth model with specific factors
Authors: Guillo, Maria Dolores | Pérez Sebastián, Fidel
Research Group/s: Grupo de Estudios de Paz y Desarrollo (GEPYD) | Análisis Económico
Center, Department or Service: Universidad de Alicante. Departamento de Métodos Cuantitativos y Teoría Económica | Universidad de Alicante. Departamento de Fundamentos del Análisis Económico
Keywords: Open-economy | Two-sector growth model | Factor endowments
Knowledge Area: Fundamentos del Análisis Económico
Issue Date: Dec-2002
Abstract: This paper investigates how a country’s specific-factors endowment affects its path of economic development. We carry out the analyses within an open economy version of the two-sector neoclassical growth model in which we introduce fixed industry-specific inputs. Our main finding is that under factor price equalization differences in input intensity across sectors can explain why nations that seem to have similar factor endowments can show very different income levels. In particular larger amounts of factors that are specific to the more capital (labor) intensive activity lead the economy to enjoy larger (smaller) long-run capital stocks and income levels. The model can also account for overtaking episodes between countries along their development paths.
Description: Comunicación presentada en el XXVII Simposio de Análisis Económico, Salamanca, 12-14 diciembre 2002.
Sponsor: This research was partially supported by the Spanish Ministry of Science and Technology BEC2001-0535 and BEC2001-0980.
URI: http://hdl.handle.net/10045/23681
Language: eng
Type: info:eu-repo/semantics/conferenceObject
Peer Review: si
Appears in Collections:INV - GEPYD - Comunicaciones a Congresos, Conferencias, etc.
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INV - DMCTE - Comunicaciones a Congresos, Conferencias, etc.

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