Sectoral specialisation in an evolutionary growth model with a Kaldorian flavour
by André Lorentz
International Journal of Computational Economics and Econometrics (IJCEE), Vol. 5, No. 3, 2015

Abstract: This paper analyses the emergence of sectoral specialisation and its effects on growth rate differences. First, we investigate the conditions allowing sectoral specialisation. Second, we investigate the relationship between specialisation patterns and growth patterns. The paper develops an agent-based growth that draws on both the Kaldorian growth literature and the Evolutionary literature on technical change. Following the Kaldorian tradition, economic growth is driven by the aggregate demand dynamics, constrained by the balance of payment. The micro-foundations of technical change are standard in the Evolutionary literature: firms develop their production capacities using R&D and are subject to selection mechanisms. Two regimes of specialisation emerge from the simulations, one driven by technological change dynamics, the second driven by the evolution of the demand structure. For each regime, the sectoral specialisation leads to growth rate differences. In the technology-driven regime these differences remain transitory, while in the demand-driven regime, they are permanent.

Online publication date: Tue, 14-Jul-2015

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