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DIRECTED STRUCTURAL CHANGE

Published online by Cambridge University Press:  07 November 2017

Robert F. Kane
Robert F. Kane*
Affiliation:
International University of Japan
*
Address correspondence to: Robert F. Kane, International University of Japan, 777 Kokusai-cho Minami-uonuma NiigataJapan949-7277; e-mail: [email protected].
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Abstract

This paper extends the existing theories of directed technical change by allowing the factors of production, skilled, and unskilled workers, to be employed in both the skill-intensive and unskilled-intensive sectors. Consequently, the direction of technical progress and the sectoral allocation of factors are jointly determined. The feedback between technical progress and the allocation of factors leads to new results concerning structural change and directed technical change. An increase in the endowment of a factor leads to a dynamic reallocation of factors toward the sector that uses the factor intensively. The reallocation of factors also affects the stability properties of directed technical change. When the parameter conditions necessary for strong bias are satisfied, the interior regime (nonspecialization) is at most locally stable. More importantly, if the relative endowment of skilled labor becomes too high (low), the economy necessarily specializes in the production of skilled (unskilled)-labor-intensive goods. Last, the relationship between the relative endowment of skilled labor and the steady-state relative wage rate is not necessarily monotonic.

Keywords

Endogenous GrowthDirected Technical ChangeStructural Change
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 5 , July 2019 , pp. 1921 - 1958
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

I thank Daron Acemoğlu, several anonymous referees, and Lei Ji for helpful insight. I am particularly indebted to John Seater and Pietro Peretto.

References

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