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Two Perspectives on Preferences and Structural Transformation

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  • Berthold Herrendorf

    ()
    (Department of Economics - W.P. Carey School of Business - Arizona State University)

  • Richard Rogerson

    ()
    (Princeton University)

  • Akos Valentinyi

    ()
    (Institute of Economics - Hungarian Academy of Sciences)

Abstract

We assess the empirical importance of income and price effects for structural transformation in the postwar US. We explain two natural approaches to the data: sectors may be categories of final expenditure or value added; e.g., the service sector may be the final expenditure on services or the value added from service industries. We estimate preferences for each approach and find that with final expenditure income effects are the dominant forces behind structural transformation whereas with value added categories price effects are dominant. We show how the input-output structure of the US economy can reconcile these findings.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1134.

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Length: 54 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:has:discpr:1134

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Keywords: income effects; preferences; relative price effects; structural transformation;

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References

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  1. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(3), pages 467-498, 06.
  2. Atkeson, A. & Ogaki, M., 1991. "Wealth-Varying Intertemporal Elasticities of Substitution Evidence from Panel and Aggregate Data," RCER Working Papers 303, University of Rochester - Center for Economic Research (RCER).
  3. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4763, C.E.P.R. Discussion Papers.
  4. Berthold Herrendorf & James A. Schmitz & Arilton Teixeira, 2009. "Transportation and development: insights from the U.S., 1840-1860," Staff Report, Federal Reserve Bank of Minneapolis 425, Federal Reserve Bank of Minneapolis.
  5. Margarida Duarte & Diego Restuccia, 2009. "The Role of the Structural Transformation in Aggregate Productivity," Working Papers tecipa-348, University of Toronto, Department of Economics.
  6. Messina, Julián, 2003. "The role of product market regulations in the process of structural change," Working Paper Series, European Central Bank 0217, European Central Bank.
  7. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
  8. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(7), pages 1317-1328, October.
  9. ten Raa,Thijs, 2006. "The Economics of Input-Output Analysis," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521602679.
  10. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, Elsevier, vol. 147(2), pages 210-224, December.
  11. Herrendorf, Berthold & Valentinyi, Akos, 2007. "Measuring Factor Income Shares at the Sector Level - A Primer," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6271, C.E.P.R. Discussion Papers.
  12. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  13. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers, Department of Economics, Williams College 2002-09, Department of Economics, Williams College.
  14. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
  15. Bah, El-hadj M., 2007. "Structural Transformation in Developed and Developing Countries," MPRA Paper 10655, University Library of Munich, Germany, revised 19 Sep 2008.
  16. Victor R. Fuchs, 1968. "Some Implications of the Growth of a Service Economy," NBER Chapters, in: The Service Economy, pages 183-200 National Bureau of Economic Research, Inc.
  17. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(3), pages 545-61, July.
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