The Magnification of a Lagging Region's Initial Economic Disadvantages on the Balanced Growth Path

RIT Economics Department Working Paper No. 19-3

21 Pages Posted: 10 May 2019

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 23, 2019

Abstract

We analyze aspects of long run economic growth in stylized lagging and leading regions. Both regions use physical capital, research and development (R&D), and knowledgeable workers to produce a final consumption good. The lagging region faces two key economic disadvantages. Specifically, the constant fractions of the output of the final consumption good that are saved to enhance the stocks of physical capital and R&D are assumed to be twice as large in the leading region as they are in the lagging region. In this scenario, we perform three tasks. First, we determine the ratio of the balanced growth path (BGP) value of output per knowledgeable worker in the leading region to its value in the lagging region. Second, we ascertain the ratio of the BGP value of R&D per knowledgeable worker in the leading region to its value in the lagging region. Finally, we show the extent to which the lagging region’s initial economic disadvantages are magnified on the BGP and then discuss some policy implications.

Keywords: Economic Growth, Lagging Region, Leading Region, Magnification Effect

JEL Classification: R11, O18

Suggested Citation

Batabyal, Amitrajeet A. and Nijkamp, Peter, The Magnification of a Lagging Region's Initial Economic Disadvantages on the Balanced Growth Path (April 23, 2019). RIT Economics Department Working Paper No. 19-3, Available at SSRN: https://ssrn.com/abstract=3376884

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology ( email )

Department of Economics, RIT
92 Lomb Memorial Drive
Rochester, NY NEW YORK 14623-5604
United States
5853134063 (Phone)
5854755777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
7
Abstract Views
242
PlumX Metrics