A Growth Model for a Two-Sector Economy with Endogenous Productivity

Download or read book A Growth Model for a Two-Sector Economy with Endogenous Productivity written by Codrina Rada and published by . This book was released on 2007 with total page 1 pages. Available in PDF, EPUB and Kindle. Book excerpt: A growth model is developed for an open dual economy. The economy expands due to a higher growth rate of labour productivity in the modern sector through the Kaldor-Verdoorn channel and higher effective demand through a Keynesian channel. The model incorporates a retardation mechanism affecting the slopes of productivity and output growth schedules as labour surplus and economies of scale diminish. A wage or profit-led regime and initial conditions may give rise to: de-industrialization in terms of both output and employment; a growth trap sustaining a situation of structural heterogeneity; or sustainable employment and adequate output and productivity growth.