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Structural Change in a Multisector Model of Growth

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  • L. Rachel Ngai
  • Christopher A. Pissarides

Abstract

We study a multisector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation and balanced aggregate growth. The conditions are weak restrictions on the utility and production functions. Along the balanced growth path, labor employed in the production of consumption goods gradually moves to the sector with the lowest TFP growth rate, until in the limit it is the only sector with nontrivial employment of this kind. The employment shares of intermediate and capital goods remain constant during the reallocation process. (JEL O41)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.1.429
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 1 (March)
Pages: 429-443

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:1:p:429-443

Note: DOI: 10.1257/aer.97.1.429
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  1. Foellmi, Reto & Zweimüller, Josef, 2002. "Structural Change and the Kaldor Facts of Economic Growth," IZA Discussion Papers 472, Institute for the Study of Labor (IZA).
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