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On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy

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  • Stijepic, Denis

Abstract

Structural change is associated with high costs for the economy and the society ranging from environmental pollution to unemployment. We focus on the three-sector framework (related to agriculture, manufacturing and services) and assume that the structural change costs increase with the strength of structural change. We show that monotonous structural change paths are minimizing the structural change costs in this framework. By using this result and the (qualitative) stylized facts of structural change based on the theoretical and empirical literature consensus, we derive the cost-minimizing strategy for a developing country. We use these results to discuss some well-known structural/trade strategies.

Suggested Citation

  • Stijepic, Denis, 2017. "On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy," MPRA Paper 77023, University Library of Munich, Germany, revised 22 Feb 2017.
    • Handle: RePEc:pra:mprapa:77023
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    References listed on IDEAS

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    11. Stijepic, Denis, 2015. "A geometrical approach to structural change modelling," Structural Change and Economic Dynamics, Elsevier, vol. 33(C), pages 71-85.
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    Cited by:

    1. Stijepic, Denis, 2017. "Empirical evidence on the geometrical properties of structural change trajectories," MPRA Paper 80854, University Library of Munich, Germany, revised 17 Aug 2017.
    2. Stijepic, Denis, 2017. "On the predictability of economic structural change by the Poincaré-Bendixson theory," MPRA Paper 80849, University Library of Munich, Germany, revised 17 Aug 2017.
    3. Stijepic, Denis, 2019. "A topological approach to structural change analysis and an application to long-run labor allocation dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 453-462.
    4. Stijepic, Denis, 2016. "Empirical evidence on the topological properties of structural paths and some notes on its theoretical explanation," MPRA Paper 82473, University Library of Munich, Germany, revised 26 Oct 2017.
    5. Stijepic, Denis, 2018. "Models of Continuous Dynamics on the 2-Simplex and Applications in Economics," MPRA Paper 86341, University Library of Munich, Germany.

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    More about this item

    Keywords

    employment; structure; transformation; industrial; structural; policy; costs; long run; geometry; vector; simplex; dynamic optimization; uncertainty; calculus of variations;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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