Industry structure and economic growth : essays on the impact of the production structure and openness on development
This thesis contains five essays on the relationship between production structure and economic growth. The first chapter examines the conditions under which intermediate inputs can be net out from the production functions in order to relate primary factors of production with net output in each sector. We conclude that this transformation is not always possible, and this finding sets the agenda for the next three chapters. The second chapter augments Lucas' (1988) two-sector growth model of learning-by-doing by allowing for interindustry linkages between the sectors. Under certain conditions, the model reproduces a number of the key stylized facts of the industrialization process. We also examine the advantages and disadvantages of openness to world markets and the possibilities of an import-substitution strategy as a way of development. The third chapter analyses the effects of education on the process of economic diversification in underdeveloped countries. Under the assumption that most technological changes in underdeveloped countries are driven by imitation, we describe how a process of input-output deepening evolves and how this process increases real wages. In the fourth chapter we use cross-country regressions to show that the correlation between some measures of interindustry dependence and the growth rate of per capita GDP seems to be positive, significant and robust. The fifth chapter explores the consequences for economic growth of decreasing returns to scale due to fixed factors at the firm's level. By assuming that the firm's fixed factors are produced with firm creation, two possible equilibria are examined: one with entry restrictions, and another with proliferation of firms. The former is characterized by a steady state with no growth; the latter is characterized by constant returns at the aggregate level and unbounded growth. We discuss the relevance of this model for industrialization and development.