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Structural Change, Urban Congestion, and the End of Growth
Author(s) -
Grossmann Volker
Publication year - 2013
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12025
Subject(s) - economics , productivity , endogenous growth theory , slowdown , per capita , workforce , technological change , population growth , monetary economics , macroeconomics , population , labour economics , development economics , economic growth , human capital , demography , sociology
Abstract This paper develops a two‐sector R&D ‐based growth model with congestion effects from increasing urban population density. We show that endogenous technological progress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and E ngel's law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long‐run. We also show that land dilution by a larger workforce may give rise to negative scale effects on ( GDP ) per capita.