ABSTRACT
This chapter aims to develop a multi-sectoral general equilibrium model that incorporates endogenous changes in productive relations, characterizes the dynamics of structural change, and derives implications regarding growth-enhancing policies. The equilibrium productive relations are fully captured by an input–output matrix. Economic backwardness implies that the input–output matrix has zero columns in potential general purpose technology (GPT) sectors. The economy has not yet realized significant technological complementarities among sectors, although potential GPT sectors have already existed, and industrialization is enabled primarily by initiation of research and development investment in potential GPT sectors. Multi-sector economic growth models such as product-variety models, however, typically assume fixed and symmetric linkages among sectors, and structural changes have not been accounted for explicitly. From a slightly different perspective, A. O. Hirschman argued that the main source of economic development is activities with high potential linkage effects, mainly backward ones.
