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The Role of the Structural Transformation in Aggregate Productivity

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  • Margarida Duarte
  • Diego Restuccia

    ()
    (Department of Economics University of Toronto)

Abstract

In this paper, we document the reallocation of employment over time between agriculture, manufacturing, and services (the process of structural transformation) and the growth rate of sectoral labor productivity across countries. We find that countries are going through a remarkably similar process of structural transformation, although with a substantial lag for some countries. We investigate whether sectoral differences in labor productivity can account for differences in the process of structural transformation and aggregate productivity across countries. We consider a model of the structural transformation and calibrate it to the experience of the United States. We use the model to measure sectoral labor productivity differences across countries and show that these differences are large and systematic both at a point in time and over time. In particular, labor productivity differences are large in agriculture and services and smaller in manufacturing. We show that the implied sectoral labor productivity differences help explain the process of structural transformation and aggregate productivity experiences across countries

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 415.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:415

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Keywords: Productivity; employment; sectors; countries.;

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  1. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  2. Berthold Herrendorf & Akos Valentinyi, 2005. "Which Sectors Make the Poor Countries so Unproductive?," IEHAS Discussion Papers 0519, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  4. Margarida Duarte & Diego Restuccia, 2006. "The productivity of nations," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 195-223.
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  14. L. Rachel Ngai & Christopher Pissarides, 2007. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4468, London School of Economics and Political Science, LSE Library.
  15. Richard Rogerson, 2007. "Structural Transformation and the Deterioration of European Labor Market Outcomes," NBER Working Papers 12889, National Bureau of Economic Research, Inc.
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  17. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1997. "The poverty of nations: a quantitative exploration," Staff Report 204, Federal Reserve Bank of Minneapolis.
  18. Margarida Duarte & Diego Restuccia, 2006. "The Structural Transformation and Aggregate Productivity in Portugal," Working Papers tecipa-261, University of Toronto, Department of Economics.
  19. Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
  20. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
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