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The Structural Transformation Between Manufacturing and Services and the Decline in the US GDP Volatility

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  • Alessio Moro

    (University of Cagliari)

Abstract

I construct a two-sector growth model to study the effect of the structural transformation between manufacturing and services on the decline in GDP volatility in the US. In the model, a change in the relative size of the two sectors affects the transmission mechanism that relates sectoral TFP shocks to endogenous variables. I calibrate the model to the US and show that, for given stochastic sectoral TFP processes in manufacturing and services, structural change generates a decline in the volatility of both aggregate TFP and GDP, in the volatility of each broad component of GDP (manufacturing consumption, services consumption and investment) and in the volatility of labor. Numerical results suggest that the structural transformation can account for 28% of the reduction in the US GDP volatility between the periods 1960-1983 and 1984-2005. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2011.09.005
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 15 (2012)
Issue (Month): 3 (July)
Pages: 402-415

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Handle: RePEc:red:issued:10-123

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Related research

Keywords: GDP volatility; Structural change; Real business cycle; Total factor productivity;

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Cited by:
  1. Carvalho, Vasco M & Gabaix, Xavier, 2010. "The Great Diversification and its Undoing," CEPR Discussion Papers 8044, C.E.P.R. Discussion Papers.
  2. Constant Lonkeng Ngouana, 2013. "Structural Transformation and the Volatility of Aggregate Output in OECD Countries," IMF Working Papers 13/43, International Monetary Fund.
  3. Cantore, C. & Ferroni, F. & León-Ledesma, M A., 2011. "Interpreting the Hours-Technology time-varying relationship," Working papers 351, Banque de France.
  4. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
  5. Cristiano Cantore & Filippo Ferroni & Miguel A. León-Ledesma, 2012. "The dynamics of hours worked and technology," Banco de Espa�a Working Papers 1238, Banco de Espa�a.
  6. Alessandro Flamini & Guido Ascari & Lorenza Rossi, 2012. "Industrial Transformation, Heterogeneity in Price Stickiness, and the Great Moderation," DEM Working Papers Series 025, University of Pavia, Department of Economics and Management.
  7. Baran Doda, 2012. "Evidence on CO2 emissions and business cycles," Grantham Research Institute on Climate Change and the Environment Working Papers 78, Grantham Research Institute on Climate Change and the Environment.

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