Structural Change and Inter-sectoral mobility in a Two-sector Economy

This paper studies the dynamics of a two-sector economy (with a natural resource-dependent sector and an industrial sector ) characterized by free inter-sectoral labor mobility and het- erogenity of agents (workers and entrepreneurs). In such a context, we analyze the effects of the deterioration of natural resources, caused by the production activity of both sec- tors, on inter-sectoral movements of the labor force (structural changes), on ecological dynamics and on the revenues of workers and entrepreneurs. As in the seminal work by Matsuyama [1], we obtain that a low productivity of labor in the resource-dependent sec- tor can fuel the industrialization process. However, differently form Matsuyama, in our model the industrialization process may give rise to a reduction in workers' revenues if the contribution to environmental depletion of the industrial sector, per unit of product, is higher than that of the resource-dependent one.