Transitional Dynamics in a Multi-Sector Ramsey-Model with Non-Homothetic Preferences: Development Traps and Structural Change Feedbacks

29 Pages Posted: 17 Feb 2013

See all articles by Denis Stijepic

Denis Stijepic

affiliation not provided to SSRN

Helmut Wagner

University of Hagen (Fernuniversitaet Hagen)

Date Written: February 15, 2013

Abstract

Recent literature studies structural change in neoclassical multi-sector growth models. The literature focuses on the analysis of dynamic equilibriums (“aggregate balanced growth paths”). We study the transitional dynamics of a multi-sector Ramsey-model with non-homothetic preferences and inter-sector technology disparity. We show that the model converges to the aggregate balanced growth path only for a subset of feasible initial capital values (“convergent range”). Outside the convergent range the economy is in development traps. Within the convergent range the transitional dynamics are quantitatively different from the transitional dynamics of a standard one-sector Ramsey-model due to feedbacks between aggregate dynamics and structural change.

Keywords: multi-sector growth modelling, neoclassical growth theory, Ramsey model, structural change, labour allocation, sectors, balanced growth, unbalanced growth

JEL Classification: O41, O14

Suggested Citation

Stijepic, Denis and Wagner, Helmut, Transitional Dynamics in a Multi-Sector Ramsey-Model with Non-Homothetic Preferences: Development Traps and Structural Change Feedbacks (February 15, 2013). Available at SSRN: https://ssrn.com/abstract=2219201 or http://dx.doi.org/10.2139/ssrn.2219201

Denis Stijepic (Contact Author)

affiliation not provided to SSRN

Helmut Wagner

University of Hagen (Fernuniversitaet Hagen) ( email )

Universitätsstrasse 41
Feithstrathe 140
D-58084 Hagen
Germany
011-49-2331-987-2640 (Phone)
011-49-2331-987-391 (Fax)

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