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Complementarity and transition to modern economic growth

Author

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  • Jeong Hyeok

    (KDI School of Public Policy and Management 87 Hoegiro, Dongdaemun-Gu, Seoul 130-868, Korea)

  • Kim Yong

    (School of Ecomnomics, Yonsei University, 262 Seongsan-no, Seodaemun-gu, Seoul 129-749, Korea)

Abstract

The Thai Socio-Economic Survey suggests that new labor market entrants increasingly enter activities with high and positive productivity growth (modern sector), but continue to enter activities with low productivity growth (traditional sector). Workers appear to stick to their initial choice of entry between these two sectors throughout their work careers. We postulate that the transition from the traditional to modern sector is gradual because sector-specific work experience complements labor. We measure the technology parameters of each sector and the partition of the economy consistent with the identifying assumption of each sector (i.e., difference in productivity growth), by implementing a structural estimation on individual earnings equations. We verify the dual partition and sector-specific complementarity do indeed exist. We then build and simulate a model of sectoral choice which explains well the observed transition dynamics of workers across sectors at the estimated parameters, using the Thai micro data.

Suggested Citation

  • Jeong Hyeok & Kim Yong, 2015. "Complementarity and transition to modern economic growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(1), pages 1-48, January.
    • Handle: RePEc:bpj:bejmac:v:15:y:2015:i:1:p:48:n:3
    DOI: 10.1515/bejm-2013-0171
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    References listed on IDEAS

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    1. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293, Elsevier.
    2. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
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    Cited by:

    1. Boyan Jovanovic, 2009. "When should firms invest in old capital?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 107-123, March.
    2. Hyeok Jeong & Robert Townsend, 2007. "Sources of TFP growth: occupational choice and financial deepening," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 179-221, July.
    3. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
    4. Jeong, Hyeok, 2008. "Assessment Of Relationship Between Growth And Inequality: Micro Evidence From Thailand," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 155-197, September.
    5. Balázs Zélity, 2023. "Age diversity and aggregate productivity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1863-1899, July.
    6. Hyeok Jeong & Yong Kim & Iourii Manovskii, 2015. "The Price of Experience," American Economic Review, American Economic Association, vol. 105(2), pages 784-815, February.
    7. Jeong,Hyeok, 2020. "Productivity Growth and Efficiency Dynamics of Korean Structural Transformation," Policy Research Working Paper Series 9285, The World Bank.

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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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