Land Price Dynamics in a Two-Sector Growth Model

This study builds a two-sector growth model with endogenous wealth accumulation and land price. The economy consists of industrial and agricultural sectors. Methodology: The model is based on the neoclassical growth theory and Ricardian theory. The household’s decision is modeled with an alternative approach proposed by Zhang two decades ago. By simulation, we demonstrate that the economic system has a unique stable steady state. The study conducts comparative dynamic analysis with regard to changes in the preference and the two sectors’ output elasticities of capital. Findings: Our results demonstrate that economic growth is in tandem with land prices. Recommendations: We show this often-mentioned empirical conclusion in an integrated neoclassical growth theory and Ricardian theory.