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Does growth cause structural change, or is it the other way around? A dynamic panel data analysis for seven OECD countries

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  • Andreas Dietrich

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Abstract

In economic development, aggregate economic growth is accompanied by structural change among the three main sectors of an economy. Nevertheless, the question whether economic growth causes structural change, or changes in the economic structure cause aggregate growth is still unanswered. To shed more light on this question, this article examines a Granger causality test in a panel environment to determine the relationship of economic growth and structural change, measured either in terms of employment shares or real value added shares. Estimation and analysis of the annual data of seven OECD countries, covering the period from 1960–2004, show that although the causality appears to be heterogeneous among these countries, some general conclusions can be drawn. Aggregate economic growth decelerates structural change in the very short run but accelerates it with some lag in time. The aggregate effect depends on whether structural change is measured in terms of employment or in terms of real value added. Conversely, structural change supports aggregate economic growth, irrespective of which measure of structural change chosen. Copyright Springer-Verlag 2012

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 43 (2012)
Issue (Month): 3 (December)
Pages: 915-944

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Handle: RePEc:spr:empeco:v:43:y:2012:i:3:p:915-944

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Keywords: Structural change; Economic growth; Tertiarization; Panel Granger causality test; L16; O14; O57;

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Cited by:
  1. Dobrescu, Emilian, 2011. "Sectoral Structure and Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-36, September.
  2. Viciu Tania-Georgia & Vasile Adrian & Costea Carmen-Eugenia, 2012. "A New Appraisal Of The Relationship Between Economic Growth And The Economic Structure," Romanian Economic Business Review, Romanian-American University, vol. 6(1), pages 10-18, May.
  3. Singh, Nirvikar & Cortuk, Orcan, 2010. "Structural Change and Growth in India," Santa Cruz Department of Economics, Working Paper Series qt7fd4n35w, Department of Economics, UC Santa Cruz.
  4. Marta C. N. Simões & Adelaide Duarte, 2013. "Human Capital and Growth in a Services Economy: the Case of Portugal," GEMF Working Papers 2013-21, GEMF - Faculdade de Economia, Universidade de Coimbra.
  5. Ikhlaas Gurrib, 2011. "The Impact of Mining and Services Industries on the Structural Change of Australia," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 4(2), pages 35-51, August.
  6. Law, Siong Hook & Lim, Thong Cheen & Ismail, Normaz Wana, 2013. "Institutions and economic development: A Granger causality analysis of panel data evidence," Economic Systems, Elsevier, vol. 37(4), pages 610-624.

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