ABSTRACT.
In this paper, we construct a two-sector semi-endogenous growth model to investigate the mechanism of sector biased technical change as well as the relationship among sector biased technical change, non-balanced
sectoral growth and persistence of structural change. If we focus on supply-side reasons, the present model shows that the fundamental driving force of both perpetual structural change and non-balanced sectoral growth comes only from the sector biased technical change. Whether technical change is biased to the particular sector or not depends on the sectoral difference in the degrees of R&D spillover effects and capital intensities. Moreover, when technical change is sector biased, high growth of the R&D expenditures could not necessarily result in high growth of GDP in the present economy. Finally, owing to the sparsity of Jacobian
in the case of sector biased technical change, we also show that local equilibrium indeterminacy could arise even there are neither increasing returns nor a small wedge between private and social returns.
KEYWORDS. aggregate balanced growth, equilibrium indeterminacy,R&D paradox, sector biased technology, structural change
