Economic Growth and Sectoral Change under Resource Reallocation Costs

Arbeitspapier

A general growth model with explicit resource reallocation costs is set up. A new feature is the property of hysteresis (i.e. a continuum of stationary equilibria) in closed-economy growth models. Employing a linear model the hysteresis range and the consequences for the long-run growth rate are determined analytically. The most important conclusions are the following: (1) An economy’s long-run position may depend critically on the initial intersectoral allocation pattern as well as on the efficiency of the resource reallocation sector; (2) if we interpret the resource reallocation sector as a specific part of the education sector, there is a straightforward possibility for the government to reduce the range of hysteresis and hence the dependence on initial conditions; (3) international trade is an important device to overcome the negative consequences of high resource reallocation costs for long-run growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 03/30

Classification and Topics

• Classification: Wirtschaft
• Subject: Sectoral change ; economic growth ; resource reallocation costs ; hysteresis ; multiplicity of equilibria ; Subsistenzwirtschaft ; Wachstumstheorie ; Wirtschaftliche Konvergenz ; Theorie ; Entwicklungsländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Steger, Thomas M.
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2003

Further information

• DOI: doi:10.3929/ethz-a-004640329
• Handle: http://hdl.handle.net/10419/171474
• Last update: 10.03.2025, 11:44 AM CET