Capital Deepening and Nonbalanced Economic Growth

By Daron Acemoglu, Veronica Guerrieri. Journal of Political Economy, 2008

847 citations recorded by the source corpus.

We present a model of nonbalanced growth based on differences in factor proportions and capital deepening. Capital deepening increases the relative output of the more capital‐intensive sector but simultaneously induces a reallocation of capital and labor away from that sector. Using a two‐sector general equilibrium model, we show that nonbalanced growth is consistent with an asymptotic equilibrium with a constant interest rate and capital share in national income. For plausible parameter values, the model generates dynamics consistent with U.S. data, in particular, faster growth of employment and slower growth of output in less capital‐intensive sectors, and aggregate behavior consistent with the Kaldor facts.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a983fea0def44cb1136beb7d8e124f47a9abc795

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Citations in the corpus

Working Paper (2015, background): “Economic analyses based on a representation of the economy as a collection of independent sectors often view the decline of the manufacturing sector as an ineluctable shift of resources toward the services sector (Baumol, 1967; Ngai and Pissarides, 2007; Acemoglu and Guerrieri, 2008).”
Job polarization and structural change (2014, methodology): “We build on the model of Ngai and Pissarides ( 2007 ) closely, with one important modification: we explicitly model sectoral labor supply.”
Gender Gaps and the Rise of the Service Economy (2017, background): “…in this section concern the evolution of 5See Herrendorf, Rogerson and Valentinyi (2013b) for a recent survey, and references therein, including Acemoglu and Guerrieri (2008), Baumol (1967), Boppart (2011), Buera and Kobaski (2012), Caselli and Coleman (2001), Kongsamut et al (2001), Ngai and…”
Tourism Specialization and Economic Development: Evidence from the Unesco World Heritage List (2009, background): “Acemoglu et al. (2001), Tabellini (2007), and Guiso, Sapienza, and Zingales (2008) provide evidence that formal institutions, cultural capital, and social capital, respectively, are persistent over time and could have long-lasting effects on income per capita.”
Productivity and Structural Change: A Review of the Literature (2008, background): “More recent growth models pick up this criticism and reconcile balanced growth at the aggregate level with structural change in an endogenous growth framework, where structural change may be induced either by the supply side as in Acemoglu and Guerrieri (2006) or by the demand side as in Foellmi and”
Structural Change With Long‐Run Income and Price Effects (2015, background): “…capital intensity, αi = α for all i ∈ I, and the felicity function in terms of the index of real consumption is isoelastic, i.e., u (C) = ( C1−θ − 1 ) / (1− θ), where θ 24Here we follow the terminology of Acemoglu and Guerrieri (2008) in referring to our equilibrium path as a constant growth path.”
Agricultural productivity, structural change, and economic growth in post-reform China (2013, neutral): “The second class of models includes Irz and Roe (2005), Ngai and Pissarides (2007), and Acemoglu and Guerrieri (2008).”
Determinants of Structural Change (2013, background): “This is the case in Acemoglu and Guerrieri (2008). In their model capital deepening occurs at different rates across sectors due to differences in sectoral labor intensities. In such setting, labor productivity could grow at different rates across sectors due to differential growth in capital-labor ”
Trends and Cycles in China’s Macroeconomy (2016, positive): “Frictionless two-sector models of capital deepening à la Acemoglu and Guerrieri (2008) assume that (labor-augmented) total factor productivity (TFP) in the capital-intensive sector grows faster than TFP in the labor-intensive sector when the elasticity of substitution between two sectors is less tha”
Has the U.S. Finance Industry Become Less Efficient? on the Theory and Measurement of Financial Intermediation (2015, positive): “What is more interesting is that it is sufficient even if the production technologies differ between the financial and non-financial sectors (see Acemoglu and Guerrieri (2008) and Philippon (2012a) for detailed discussions).”
Recent Declines in Labor's Share in US Income: A Preliminary Neoclassical Account (2015, background): “Specifically, the “between” and “within” sector 14 For a theoretical exploration of the relationship between aggregate and sector shares see: (Acemoglu and Guerrieri 2008).”
Structural Change and the Kaldor Facts in a Growth Model with Relative Price Effects and Non-Gorman Preferences (2011, methodology): “(3)Acemoglu and Guerrieri (2008) conclude: “It would be particularly useful to combine the mechanism proposed in this paper with nonhomothetic preferences and estimate a structural version of the model with multiple sectors using data from the U.”