Working Paper: NBER ID: w10899
Authors: Kala Krishna; Cesar A. Perez
Abstract: We study a model designed to understand the concept of unbalanced growth. We define leading sectors to be those that raise the profits from industrialization for other sectors the most. We identify the leading sectors and show that subsidizing them in sequences will raise welfare if the future is not discounted too strongly.
Keywords: No keywords provided
JEL Codes: O12; O30; D50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Industrialization in leading sectors (O14) | Increased profits from industrialization for other sectors (O14) |
| Increased profits from industrialization for other sectors (O14) | Increased overall welfare (D69) |
| Industrialization in leading sectors (O14) | Reduced cost of the final good (D24) |
| Reduced cost of the final good (D24) | Increased demand for intermediate goods (L60) |
| Increased demand for intermediate goods (L60) | Increased profitability of intermediate goods (D21) |
| Subsidizing leading sectors in sequence (L52) | Virtuous cycle of industrialization throughout the economy (O25) |
| Industrialization in one sector (O14) | Further industrialization in other sectors (L59) |
| Conditions for substantial cost savings from industrialization (L23) | Stimulate self-sustaining growth (O00) |
| Subsidizing leading sector under right conditions (O25) | Shift economy from low-level equilibrium to higher growth trajectory (O49) |