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The Three-Sector Ramsey Model

  • Terry L. Roe
  • D. Şirin Saracoğlu
  • Rodney B.W. Smith
Chapter

Abstract

This chapter develops a three-sector growth model with three factors of production. One factor is specific to a sector, and one sector’s output is a home-good, meaning it is not traded in international markets. The chapter builds upon the static three-sector model developed in Chapter 2, and the two sector Ramsey model presented in the previous chapter. The dynamic three-sector model is a convenient point of departure for developing policy models with more sectoral detail, and for studying various other aspects of economic growth that have received attention at least from the time of Arthur Lewis. The seminal work of Lewis (1954), further developed by Fei and Ranis (1961) emphasize the supply of surplus labor from the farm sector to the rest of the economy as an essential part of the growth process. This theme was also emphasized in the work of Jorgenson (1967). In spite of the renewed interest in growth theory in the 1980s, Matsuyama (1992) was among the first to develop a model of endogenous growth with two distinct sectors, agriculture and manufacturing.

Keywords

Budget Constraint Capital Stock Capital Asset Labor Share Representative Household 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag New York 2010

Authors and Affiliations

  • Terry L. Roe
    • 1
  • D. Şirin Saracoğlu
    • 2
  • Rodney B.W. Smith
    • 1
  1. 1.Department of Applied EconomicsUniversity of MinnesotaSt. PaulUSA
  2. 2.Department of EconomicsMiddle East Technical University (METU)AnkaraTurkey

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