Industrial structure and productivities in a two-sector growth model

We set up a model of heterogeneous-producers based on the semi-rival technology to study how industrial structure transforms and different sectional productivities. In a fully market-oriented economy, the industrial structure is endogenous and sectional productivities are the same. Employing fiscal subsidies to different industries lead to changes in both industrial structure and productivities, while the growth rate and interest rate keep fixed. For plausible values of parameters, the benchmark model generates results consistent with the United States’ data, and the extension model partly explains China’s industrial transformation and changes of industrial productivities.