Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2013

Journal or Book Title

Eurasian Economic Review

Volume

3

Issue

1

First Page or Article ID Number

8

Last Page

38

DOI

10.14208/BF03353839

Abstract

The interest rate and the rate of economic growth are often regarded as roughly constant as economies grow. Moreover, the share of agriculture in production and the share of rural population typically shrink. We show that an otherwise standard growth model that includes a backward and an advanced sector can account for these regularities. The mechanism works as follows: as the economy accumulates capital, labor flows from the backward sector to the advanced one. This migration prevents the usual diminishing marginal returns of capital. As a result, the interest rate and the growth rate of the economy remain constant during the transition to the steady state.

JEL Classification

O14, O15, O18, O41, O47

Comments

This is a working paper of an article from Eurasian Economic Review 3 (2013): 8, doi:10.14208/BF03353839. The final publication is available at Springer via http://dx.doi.org/10.14208/BF03353839.

Copyright Owner

Eurasia Business and Economics Society

Language

en

File Format

application/pdf

Published Version Working Paper

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