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Frontiers of Economics in China

Front. Econ. China    2016, Vol. 11 Issue (1) : 60-87
Orginal Article
The Dynamic Process of Economic Takeoff and Industrial Transformation
Ming-Jen Chang1,Ping Wang2,Danyang Xie3()
1. Department of Economics, National Dong Hwa University, Hualien 97401, Taiwan, China
2. Department of Economics, Washington University in St. Louis, St. Louis, MO 63130, USA; National Bureau of Economic Research (NBER)
3. Center for Economic Development Research, Economics and Management School, Wuhan University, Wuhan 430072, China; Department of Economics, HKUST, Hong Kong, China
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This paper studies the patterns and key determinants of staged economic development. We construct a two-sector dynamic general equilibrium model populated with one-period lived non-overlapping generations, featuring endogenous enhancement in modern technology and endogenous accumulation of labor skills and capital funds. We consider preference biases toward the traditional sector of necessities, capital barriers to the modern sector, and imperfect substitution between skilled and unskilled workers. By calibrating the model to fit historic U.S. development, we find that modern technologies, saving incentives and capital scales/barriers are the most important determinants of the takeoff time. By evaluating the process of economic development, we identify that what shapes saving incentives is most crucial for the speed of modernization after taking off. We further establish that labor, capital and output are most responsive to the initial state of modern technologies, but least responsive to skill endowments, along the dynamic transition path

Keywords economic takeoff      industrial transformation      endogenous skill      technological advancements      saving incentives      preference biases      capital barriers     
Issue Date: 22 March 2016
 Cite this article:   
Ming-Jen Chang,Ping Wang,Danyang Xie. The Dynamic Process of Economic Takeoff and Industrial Transformation[J]. Front. Econ. China, 2016, 11(1): 60-87.
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