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Capital Accumulation and Structural Change in a Small Open Economy
Author(s) -
Hu Yunfang,
Mino Kazuo
Publication year - 2014
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12087
Subject(s) - homothetic transformation , economics , structural change , small open economy , capital (architecture) , growth model , capital accumulation , open economy , transformation (genetics) , economy , macroeconomics , human capital , market economy , history , geometry , archaeology , exchange rate , biochemistry , chemistry , gene , mathematics
This paper explores the relation between capital accumulation and transformation of industrial structure in a small open economy. Using a three‐sector neoclassical growth model with non‐homothetic preferences, we examine the dynamic behaviour of the small country in the alternative trade regimes. We show that capital accumulation plays a leading role in the process of structural transformation. It is also revealed that the trade pattern significantly affects structural change. We demonstrate that our model can mimic a typical pattern of change in industrial structure that has been observed in many developed economies.