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The B.E. Journal of Macroeconomics

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International capital mobility and structural transformation

Kyungsoo Kim / Wankeun Oh / E. Young SongORCID iD: http://orcid.org/0000-0002-4225-0468
Published Online: 2018-02-01 | DOI: https://doi.org/10.1515/bejm-2017-0089


This study examines the role of international capital mobility in shaping the relation between economic growth and structural transformation. We build a small open economy Ramsey model with two goods, tradables and nontradables. We show that if the long-run autarky interest rate of a small open economy is higher than the world interest rate, the employment and value-added shares of the tradables sector will rise over time. In the opposite case, the shares will fall. Because the autarky interest rate increases with the rate of technological progress, our result suggests that cross-country differences in the rate of technological progress may be a significant factor in accounting for diverse patterns of structural changes among countries.

Keywords: capital mobility; financial integration; industrialization; structural transformation; trade imbalance

JEL Classification: O41; F43; F21


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About the article

Published Online: 2018-02-01

Funding Source: Sogang University

Award identifier / Grant number: 201310029.01

Funding Source: Hankuk University of Foreign Studies

Award identifier / Grant number: Research Fund 2017

E. Young Song gratefully acknowledges the financial support from Sogang University, Funder Id: 10.13039/501100002646 under the Research Grant of 201310029.01. Wankeun Oh gratefully acknowledges the financial support from Hankuk University of Foreign Studies, Funder Id: 10.13039/501100002486, Research Fund 2017.

Citation Information: The B.E. Journal of Macroeconomics, 20170089, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2017-0089.

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