Economic growth and sector dynamics

Joseph Zeira, Hosny Zoabi

Research output: Contribution to journalArticlepeer-review

30 Scopus citations

Abstract

This paper analyzes the endogenous determination of sectors in a growing economy. It assumes that there are traditional sectors and modern sectors and economic growth is driven by rising productivity of the modern sectors. It also assumes that individuals are heterogeneous, which leads to increasing marginal opportunity costs in creating new modern sectors. We show that under these main assumptions, economic growth first increases diversification to sectors and then reduces it. We also show that for the equilibrium to be stable and well-behaved, it is required that the modern and traditional sectors should be substitutes and not complements.

Original languageEnglish
Pages (from-to)1-15
Number of pages15
JournalEuropean Economic Review
Volume79
DOIs
StatePublished - 1 Oct 2015

Bibliographical note

Publisher Copyright:
© 2015 Elsevier B.V.

Keywords

  • Diversification
  • Economic growth
  • Modern sectors
  • Substitutability
  • Traditional sectors

Fingerprint

Dive into the research topics of 'Economic growth and sector dynamics'. Together they form a unique fingerprint.

Cite this