IDEAS home Printed from https://ideas.repec.org/a/fec/journl/v11y2016i1p60-87.html
   My bibliography  Save this article

The Dynamic Process of Economic Takeoff and Industrial Transformation

Author

Listed:
  • Ming-Jen Chang

    (Department of Economics, National Dong Hwa University, Hualien 97401, Taiwan, China)

  • Ping Wang

    (Department of Economics, Washington University in St. Louis, St. Louis, MO 63130, USA; National Bureau of Economic Research (NBER))

  • Danyang Xie

    (Center for Economic Development Research, Economics and Management School, Wuhan University, Wuhan 430072, China; Department of Economics, HKUST, Hong Kong, China)

Abstract

This paper studies the patterns and key determinants of staged economic development. We construct a two-sector dynamic general equilibrium model populated with one-period lived non-overlapping generations, featuring endogenous enhancement in modern technology and endogenous accumulation of labor skills and capital funds. We consider preference biases toward the traditional sector of necessities, capital barriers to the modern sector, and imperfect substitution between skilled and unskilled workers. By calibrating the model to fit historic U.S. development, we find that modern technologies, saving incentives and capital scales/barriers are the most important determinants of the takeoff time. By evaluating the process of economic development, we identify that what shapes saving incentives is most crucial for the speed of modernization after taking off. We further establish that labor, capital and output are most responsive to the initial state of modern technologies, but least responsive to skill endowments, along the dynamic transition path.

Suggested Citation

  • Ming-Jen Chang & Ping Wang & Danyang Xie, 2016. "The Dynamic Process of Economic Takeoff and Industrial Transformation," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 11(1), pages 60-87, March.
    • Handle: RePEc:fec:journl:v:11:y:2016:i:1:p:60-87
    as

    Download full text from publisher

    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-005-016-0005-3
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    3. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, vol. 61(2), pages 251-272, March.
    4. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    5. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-133, March.
    6. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
    7. Wang, Ping & Xie, Danyang, 2004. "Activation of a modern industry," Journal of Development Economics, Elsevier, vol. 74(2), pages 393-410, August.
    8. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 151-172.
    9. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    10. Mr. Sergio Rebelo & Ms. Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    11. Trindade, Vitor, 2005. "The big push, industrialization and international trade: The role of exports," Journal of Development Economics, Elsevier, vol. 78(1), pages 22-48, October.
    12. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    13. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    14. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
    15. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, August.
    16. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    17. John Laitner, 2000. "Structural Change and Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 545-561.
    18. Robert E. Lucas, Jr., 2004. "Life Earnings and Rural-Urban Migration," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 29-59, February.
    19. Philippe Aghion, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Econometrica, Econometric Society, vol. 70(3), pages 855-882, May.
    20. Ngai, L. Rachel, 2004. "Barriers and the transition to modern growth," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1353-1383, October.
    21. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    22. Eric W. Bond & Ronald W. Jones & Ping Wang, 2005. "Economic Takeoffs in a Dynamic Process of Globalization," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 1-19, February.
    23. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chu, Angus C. & Furukawa, Yuichi & Wang, Xilin, 2022. "Rent-seeking government and endogenous takeoff in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 72(C).
    2. Luigi Aldieri & Maxim N. Kotsemir & Concetto Paolo Vinci, 2020. "The Effects of Collaboration on Research Performance of Universities: an Analysis by Federal District and Scientific Fields in Russia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(2), pages 766-787, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Dennis Tao & Zhu, Xiaodong, 2013. "Modernization of agriculture and long-term growth," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 367-382.
    2. Monteforte, Fabio, 2020. "Structural change, the push-pull hypothesis and the Spanish labour market," Economic Modelling, Elsevier, vol. 86(C), pages 148-169.
    3. Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2015. "Endowment structures, industrial dynamics, and economic growth," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 244-263.
    4. Afolabi Tunde Ahmed & Tsimisaraka Raymondo Sandra Marcelline & Sabi Couscous Mouhamadou Nazirou, 2021. "Empirical Study of the Impact of Governance on Economic Structural Change: Evidence from Sub-Saharan African Countries," International Journal of Science and Business, IJSAB International, vol. 5(8), pages 260-277.
    5. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    6. Fedderke, Johannes W., 2018. "Exploring unbalanced growth: Understanding the sectoral structure of the South African economy," Economic Modelling, Elsevier, vol. 72(C), pages 177-189.
    7. Garriga, Carlos & Hedlund, Aaron & Tang, Yang & Wang, Ping, 2021. "Rural-urban migration and house prices in China," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    8. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    9. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    10. Alonso-Carrera, Jaime & Raurich, Xavier, 2018. "Labor mobility, structural change and economic growth," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 292-310.
    11. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    12. Gray, Elie & Grimaud, André & Le Bris, David, 2018. "The Farmer, the Blue-collar, and the Monk: Understanding economic development through saturations of demands and non-homothetic productivity gains," TSE Working Papers 18-906, Toulouse School of Economics (TSE).
    13. Yuki, Kazuhiro, 2016. "Education, Inequality, And Development In A Dual Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 20(1), pages 27-69, January.
    14. Daly, Saida & Garroud, Chadia, 2020. "The effects of Entrepreneurship and Sectoral Outputs on three Dimensions of Sustainable Development: A Literature Review and an Empirical Assessment for Developed Countries," MPRA Paper 104945, University Library of Munich, Germany, revised 16 Oct 2020.
    15. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    16. Margarida Duarte & Diego Restuccia, 2010. "The Role of the Structural Transformation in Aggregate Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 129-173.
    17. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
    18. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
    19. Anne Villamil & Xiaobing Wang & Yuxiang Zou, 2020. "Growth and development with dual labor markets," Manchester School, University of Manchester, vol. 88(6), pages 801-826, December.
    20. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.

    More about this item

    Keywords

    economic takeoff; industrial transformation; endogenous skill; technological advancements; saving incentives; preference biases; capital barriers;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fec:journl:v:11:y:2016:i:1:p:60-87. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank H. Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.