Working Paper: NBER ID: w27731
Authors: Francisco J. Buera; Joseph P. Kaboski; Mart Mestieri; Daniel G. O'Connor
Abstract: Dynamic models of structural transformation are often non-stationary, precluding balanced growth path (BGP) analysis. We develop a generalization of the BGP concept that we call a Stable Transformation Path (STraP). The STraP characterizes the medium-term dynamics of the economy in a turnpike sense; it is the non-stationary path toward which the economy (quickly) con- verges from an arbitrary initial capital stock. Calibrated simulations demonstrate that these medium-term dynamics have important quantitative implications for structural transformation, investment, and growth, including slow convergence. Medium-term dynamics alone account for the observed 40% secular decline in average growth rates across stages of development.
Keywords: Structural Transformation; Economic Growth; Capital Accumulation; Medium-term Dynamics
JEL Codes: O10; O11; O14; O4; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| structural transformation (L16) | economic growth (O49) |
| stable transformation path (strap) (D50) | capital convergence (F62) |
| medium-term dynamics of the strap (E32) | decline in average growth rates (O49) |
| structural transformation within the strap (P21) | time-varying aggregate productivity growth (O49) |
| structural transformation within the strap (P21) | changing relative prices of investment (G19) |
| time-varying aggregate productivity growth (O49) | slowdown in overall growth (F62) |
| changing relative prices of investment (G19) | slowdown in overall growth (F62) |
| poor economy (P19) | grow faster than advanced economies (O54) |