This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. Forthcoming Articles
  5. A Technology-Gap Model of ‘Premature’ Deindustrialization

A Technology-Gap Model of ‘Premature’ Deindustrialization

  • Ippei Fujiwara
  • Kiminori Matsuyama
American Economic Review (Forthcoming)

Abstract

We propose a parsimonious mechanism for generating premature deindustrialization (PD). In the baseline model, the Baumol effect drives the hump-shaped path of the manufacturing share. Countries follow different paths due to the difference in the sector-specific adoption lags. The condition for PD under which countries differ only in technology gap implies that the cross-country productivity dispersion is the largest in agriculture. Moreover, when calibrated to match Rodrik (2016)’s findings, it is the smallest in manufacturing. In three extensions, we add the Engel effect, international trade, and catching-up by late industrializers, to demonstrate the robustness of the mechanism.

Downloads