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The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Wang, Pengfei

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Innovation, specialization and growth in a model of structural change

Rainer Andergassen / Franco Nardini / Massimo Ricottilli
Published Online: 2018-03-21 | DOI: https://doi.org/10.1515/bejm-2017-0095

Abstract

In this paper we investigate the process of creation and destruction of industries as it stems from productivity increasing innovations and from the induced changes of consumption patterns. In our model industries whose demand increases experience an expansion of the number of intermediate goods and hence of their research effort, while those whose demand declines undergo a cost-cutting restructuring with a corresponding reduction of the number of intermediates. We show that if aggregate consumption is concentrated on high (low) priority goods in the early (later) stages of the economy’s development and spread out more evenly in an intermediate stage, then the diversification of the economy over the development path is inversely U-shaped: a result that is consistent with the empirical evidence in Imbs and Wacziarg 2003 “Stages of Diversification.” American Economic Review 93: 63–86.

Keywords: development; innovation; specialization; structural change

JEL Classification: O10; O30; O40

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About the article

Published Online: 2018-03-21


Citation Information: The B.E. Journal of Macroeconomics, 20170095, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2017-0095.

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