Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-28T01:21:23.276Z Has data issue: false hasContentIssue false
  • English
  • Français

SECTORAL SHIFT, WEALTH DISTRIBUTION, AND DEVELOPMENT

Published online by Cambridge University Press:  01 September 2008

Kazuhiro Yuki
Kazuhiro Yuki*
Affiliation:
Kyoto University
*
Address correspondence to: Kazuhiro Yuki, Faculty of Economics, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto, 606-8501, Japan; E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Two phenomena are widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of the population. The question is why some economies have succeeded in such structural change, but others do not. To examine the question, an overlapping generations (OLG) model that explicitly takes into account the sectoral shift and human capital accumulation as sources of development is constructed. It is shown that, for a successful structural change, an economy must start with a wealth distribution that gives rise to an adequate size of the “middle class.” Once the economy initiates the “take-off,” the sectoral shift and human capital growth continue until it reaches the steady state with high income and equal distribution. However, when the productivity of the traditional sector is low, irrespective of the initial distribution and the productivity of the modern sector, it fails in the sectoral shift and ends up in one of steady states with low income and high inequality. Thus, sufficient productivity of the traditional sector is a prerequisite for development.

Keywords

Human CapitalSectoral ShiftStructural ChangeWealth Distribution
Type
Articles
Information
Macroeconomic Dynamics , Volume 12 , Issue 4 , September 2008 , pp. 527 - 559
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aghion, Philippe and Patrick, Bolton (1997) A trickle-down theory of growth and development with debt overhang. Review of Economic Studies 64 (2), 151–172.CrossRefGoogle Scholar
Bairoch, Paul (1975) The Economic Development of the Third World Since 1900. Berkeley and Los Angeles: University of California Press.Google Scholar
Banerjee, Abhijit V. and Newman, Andrew F. (1993) Occupational choice and the process of development. Journal of Political Economy 101 (2), 274–298.CrossRefGoogle Scholar
Benabou, Roland (1996a) Heterogeneity, stratification, and growth: Macroeconomic implications of community structure and school finance. American Economic Review 86 (3), 584–609.Google Scholar
Benabou, Roland (1996b) Inequality and growth. In Bernanke, Ben and Julio, Rotemberg (eds.), NBER Macroeconomic Annual 1996, pp. 11–92. Cambridge, MA: MIT Press.Google Scholar
Benhabib, Jess and Aldo, Rustichini (1996) Social conflict and growth. Journal of Economic Growth 1 (1), 129–146.CrossRefGoogle Scholar
Deininger, Klaus and Pedro, Olinto (2000) Asset Distribution, Inequality, and Growth. Mimeo, World Bank.CrossRefGoogle Scholar
Deininger, Klaus and Lyn, Squire (1998) New ways of looking at old issues: Inequality and growth. Journal of Development Economics 57 (2), 259–287.CrossRefGoogle Scholar
Easterly, William (2001) The middle class consensus and economic development. Journal of Economic Growth 6 (4), 317–335.CrossRefGoogle Scholar
Echevarria, Cristina (1997) Changes in sectoral composition associated with economic growth. International Economic Review 38 (2), 431–452.CrossRefGoogle Scholar
Galor, Oded and Omer, Moav (2004) From physical to human capital accumulation: Inequality in the process of development. Review of Economic Studies 71 (4), 1001–1026.CrossRefGoogle Scholar
Galor, Oded and Joseph, Zeira (1993) Income distribution and macroeconomics. Review of Economic Studies 60 (1), 35–52.CrossRefGoogle Scholar
Hansen, Gary D. and Edward, C. Prescott (2002) Malthus to Solow. American Economic Review 92 (4), 1205–1217.CrossRefGoogle Scholar
Hayami, Yujiro and Vernon, Ruttan (1985) Agricultural Development: An International Perspective. Baltimore MD: Johns Hopkins University Press.Google Scholar
Kendrick, John W. (1976) The Formation and Stocks of Total Capital. New York: Columbia University Press for the NBER.Google Scholar
Kongsamut, Piyabha, Sergio, Rebelo, and Danyang, Xie (2001) Beyond balanced growth. Review of Economic Studies 68 (4), 869–882.CrossRefGoogle Scholar
Laitner, John (2000) Structural change and economic growth. Review of Economic Studies 67 (3), 545–561.CrossRefGoogle Scholar
Larson, Donald and Yair, Mundlak (1997) On the intersectoral migration of agricultural labor. Economic Development and Cultural Change 45 (2), 295–319.CrossRefGoogle Scholar
Lewis, Arthur W. (1954) Economic development with unlimited supplies of labour. Manchester School of Economic and Social Studies 22 (2), 139–191.CrossRefGoogle Scholar
Ljungqvist, Lars (1993) Economic underdevelopment: The case of missing market for human capital. Journal of Development Economics 40 (2), 219–239.CrossRefGoogle Scholar
Lloyd-Ellis, Huw and Dan, Bernhardt (2000) Enterprise, inequality and economic development. Review of Economic Studies 67 (1), 147–168.CrossRefGoogle Scholar
Marcouiller, Douglas, Veronica, Ruiz de Castilla and Christopher, Woodruff (1997) Formal measures of the informal-sector wage gap in Mexico, El Salvador, and Peru. Economic Development and Cultural Change 45 (2), 367–392.CrossRefGoogle Scholar
Matsuyama, Kiminori (1992) Agricultural productivity, comparative advantage, and economic growth. Journal of Economic Theory 58 (2), 317–334.CrossRefGoogle Scholar
Minten, Bart and Steven, Kyle (1999) The effect of distance and road quality on food collection, marketing margins, and traders' wages: Evidence from the former Zaire. Journal of Development Economics 60 (2), 467–495.CrossRefGoogle Scholar
Ngai, Rachel and Christopher, Pissarides (2004) Structural Change in a Multi-Sector Model of Growth. Mimeo, London School of Economics.CrossRefGoogle Scholar
Persson, Torsten and Guido, Tabellini (1994) Is inequality harmful for growth? Theory and evidence. American Economic Review 84 (3), 600–621.Google Scholar
Psacharopoulos, George (1989) Time trends of the returns to education: Cross-national evidence. Economics of Education Review 8 (3), 225–233.CrossRefGoogle Scholar
Psacharopoulos, George (1994) Returns to investment in education: A global update. World Development 22 (9), 1325–1343.CrossRefGoogle Scholar
Qian, Yingyi (2003) How reform worked in China. In Dani, Rodrik (ed.), In Search of Prosperity: Analytic Narratives on Economic Growth, pp. 297–333. Princeton, NJ: Princeton University Press.Google Scholar
Ranis, Gustav and Frances, Stewart (1999) V-goods and the role of the urban informal sector in development. Economic Development and Cultural Change 47 (2), 259– 288.CrossRefGoogle Scholar
Schultz, Paul (1988) Education investments and returns. In Hollis, Chenery and Srinvasan, T. N. (eds.), Handbook of Development Economics, Volume 1, pp. 543–630. Amsterdam, New York, and Oxford: Elsevier Science, North-Holland.Google Scholar
Syrquin, Moshe (1988) Patterns of structural change. In Hollis, Chenery and Srinvasan, T. N. (eds.), Handbook of Development Economics, Volume 1, pp. 203–273. Amsterdam, New York, and Oxford: Elsevier Science, North-Holland.Google Scholar
Tsang, Mun C. (2000) Education and national development in China since 1949: Oscillating policies and enduring dilemmas. In Chung-ming, Lau and Jianfa, Shen (eds.), China Review 2000, pp. 579–618. Hong Kong: Chinese University Press.Google Scholar
Wang, Ping and Danyang, Xie (2004) Activation of a modern industry. Journal of Development Economics 73 (2), 393–410.CrossRefGoogle Scholar
World Bank (1983) World Development Report 1983. New York: Oxford University Press.Google Scholar