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A Three-Sector Model of Structural Transformation and Economic Development

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  • Bah, El-hadj M.

Abstract

Growth accounting exercises point to aggregate TFP dierences as the dominant source of the large cross-country income dierences. In this paper, I ask which sectors account for the aggregate TFP gap between rich and poor countries. Data limitations for developing countries have led researchers to use indirect methods for estimating sectoral TFPs. This paper proposes a new approach for estimating sectoral TFP using panel data on sectoral employment shares and GDP per capita. The approach builds a model of structural transformation and uses it to infer sectoral TFP time series consistent with the reallocation of labor between sectors and GDP per capita growth of a set of developing countries over a 40-year period. I nd that relative to the US, developing countries are the least productive in agriculture, followed by services and then manufacturing. While these ndings are consistent with empirical studies, they dier from ndings in the growth literature.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10654.

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Date of creation: Nov 2007
Date of revision: 19 Sep 2008
Handle: RePEc:pra:mprapa:10654

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Keywords: Productivity; Sectoral TFP; Structural Transformation; Eco- nomic growth; Economic Development;

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  1. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(2), pages 235-259, 04.
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  12. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  13. Bah, El-hadj M., 2007. "Structural Transformation in Developed and Developing Countries," MPRA Paper 10655, University Library of Munich, Germany, revised 19 Sep 2008.
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  16. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  17. Marla Ripoll & Juan Carlos Cordoba, 2005. "Endogenous TFP and Cross-Country Income Differences," Working Papers, University of Pittsburgh, Department of Economics 247, University of Pittsburgh, Department of Economics, revised Jan 2005.
  18. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, American Economic Association, vol. 92(2), pages 160-164, May.
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  20. Hendricks, Lutz A., 2002. "How Important is Human Capital for Development? Evidence from Immigrant Earnings," Staff General Research Papers, Iowa State University, Department of Economics 11409, Iowa State University, Department of Economics.
  21. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661306, December.
  22. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
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Cited by:
  1. Bah, El-hadj M., 2007. "Structural Transformation in Developed and Developing Countries," MPRA Paper 10655, University Library of Munich, Germany, revised 19 Sep 2008.
  2. Murat Ungor, 2011. "De-industrialization of the Riches and the Rise of China," 2011 Meeting Papers 740, Society for Economic Dynamics.
  3. Loris Rubini, 2013. "Growth, Structural Transformation, and Volatility," Documentos de Trabajo, Instituto de Economia. Pontificia Universidad Católica de Chile. 444, Instituto de Economia. Pontificia Universidad Católica de Chile..

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