Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171474 
Year of Publication: 
2003
Series/Report no.: 
Economics Working Paper Series No. 03/30
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
A general growth model with explicit resource reallocation costs is set up. A new feature is the property of hysteresis (i.e. a continuum of stationary equilibria) in closed-economy growth models. Employing a linear model the hysteresis range and the consequences for the long-run growth rate are determined analytically. The most important conclusions are the following: (1) An economy’s long-run position may depend critically on the initial intersectoral allocation pattern as well as on the efficiency of the resource reallocation sector; (2) if we interpret the resource reallocation sector as a specific part of the education sector, there is a straightforward possibility for the government to reduce the range of hysteresis and hence the dependence on initial conditions; (3) international trade is an important device to overcome the negative consequences of high resource reallocation costs for long-run growth.
Subjects: 
Sectoral change
economic growth
resource reallocation costs
hysteresis
multiplicity of equilibria
JEL: 
O0
N1
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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