Conformism and Structural Change
26 Pages Posted: 28 Dec 2011
Date Written: December 27, 2011
Abstract
We study structural change in a simple, two-sector endogenous growth model and show that the presence of commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between different goods, the two sectors grow at different rates, whereas the aggregate economy exhibits balanced growth in the sense that capital stock and expenditure grow at the same constant rate. Under the more restrictive condition such that the degrees of consumption externalities are the same, structural change does not occur. We also show that the dependence of the benchmark consumption levels on the past consumption is crucial for the divergent patterns of structural change across countries.
Keywords: Structural change, Consumption, externalities, Two-sector growth model, Kaldor facts
JEL Classification: E21, E30, O10, O41
Suggested Citation: Suggested Citation
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