Industrialization of Developing Countries in a Multicountry, Multisector Capital Accumulation Model
This publication shows that industrialization of developing countries happens when their relative share in global production becomes larger than the global demand for consumption goods.
Industrialization is simulated in a capital accumulation model with two countries, three goods, and two factors. The model accommodates trade relations where countries specialize in producing certain goods and includes production under monopolistic competition and intermediate inputs. Capital mobility across the border can facilitate the industrialization of developing countries. They will continue borrowing capital from advanced countries even at the steady state.
- Literature Review
- The Model
- Numerical Examples
- Introduction of International Capital Mobility
- Appendix: Relationship Between Varieties and Synthetic Goods