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Structural change in a multi-sector model of growth

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  • L. Rachel Ngai
  • Christopher Pissarides

Abstract

We study a multi-sector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labour reallocation, and constant aggregate growth path. The conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists. We present evidence from US two-digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services. We show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model.

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File URL: http://eprints.lse.ac.uk/3550/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3550.

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Length: 45 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:ehl:lserod:3550

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Keywords: multi-sector growth; sectoral employment; structural change and unbalanced growth;

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References

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  1. Falvey, Rodney E & Gemmell, Norman, 1996. "Are Services Income-Elastic? Some New Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(3), pages 257-69, September.
  2. 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).
  3. Donghoon Lee & Kenneth I. Wolpin, 2006. "Intersectoral Labor Mobility and the Growth of the Service Sector," Econometrica, Econometric Society, vol. 74(1), pages 1-46, 01.
  4. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 01/85, International Monetary Fund.
  5. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-96.
  6. Oulton, Nicholas, 2001. "Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 605-27, October.
  7. Daniel E. Sichel, 2000. "The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 367-370, August.
  8. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  9. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
  10. Messina, Julián, 2003. "The role of product market regulations in the process of structural change," Working Paper Series 0217, European Central Bank.
  11. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  12. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, July.
    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, July.
  13. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  14. Baumol, William J & Blackman, Sue Anne Batey & Wolff, Edward N, 1985. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 806-17, September.
  15. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  16. Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
  17. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, December.
  18. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
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