The Stable Transformation Path

Dynamic models of structural transformation are often non-stationary, precluding balanced growth path (BGP) analysis. We develop a generalization of the BGP concept that we call a Stable Transformation Path (STraP). The STraP characterizes the medium-term dynamics of the economy in a turnpike sense; it is the non-stationary path toward which the economy (quickly) converges from an arbitrary initial capital stock. Calibrated simulations demonstrate that these medium-term dynamics have important quantitative implications for structural transformation, investment, and growth, including slow convergence. Medium-term dynamics alone account for the observed 40% secular decline in average growth rates across stages of development.

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Joseph P. Kaboski is the David F. and Erin M. Seng Foundation Professor of Economics in the Department of Economics at the University of Notre Dame and a Fellow of the Kellogg Institute. His research focuses on growth, development and international economics. He has published scholarly articles in many journals including, the American Economic Review, Econometrica, the Journal of Economic Theory, the Journal of Monetary Economics, and the Journal of the European Economic Association.  He is an Associate Editor at the Journal of Human Capital. a Research Associate of the National Bureau of Economic Research, and a Fellow and Board Member of the Bureau of Research in Economics Analysis of Development. He received his Ph.D. in Economics from the University of Chicago in 2001 and has previously been an assistant and associate professor at Ohio State University and a visiting professor at the University of Chicago.