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Growth and Structural Transformation

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  • Richard Rogerson

    (Arizona State University)

  • Akos Valentinyi

    (University of Southampton)

  • Berthold Herrendorf

    (Arizona State University)

Abstract

We illustrate the usefulness of our approach by applying it to the so called Balassa-Samuelson effect, that is, in a cross sectional sense, countries with higher ppp adjusted incomes tend to have higher aggregate price levels (in a common numeraire). We show that as the US economy develops, its aggregate price level increases for two reasons. First, services experienced smaller TFP growth than the other two sectors. Second, the consumption share of services increased. This has the interesting implication that the difference in the aggregate price level between a slow and a fast growing economy should become larger over time. In other words, the Balassa-Samuelson effect should emerge endogenously. This prediction of our work is consistent with the observation that the Balassa-Samuleson effect is a fairly recent phenomenon that has become more pronounced over time.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 757.

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Date of creation: 2007
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Handle: RePEc:red:sed007:757

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References

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Cited by:
  1. Claudia Olivetti, 2013. "The Female Labor Force and Long-run Development: The American Experience in Comparative Perspective," NBER Chapters, in: Human Capital in History: The American Record National Bureau of Economic Research, Inc.
  2. repec:fip:fedreq:y:2011:i:3q:p:329-357:n:vol.97no.3 is not listed on IDEAS
  3. Benjamin Bridgman, 2013. "Home Productivity," BEA Working Papers 0091, Bureau of Economic Analysis.
  4. Era Dabla-Norris & Alun H. Thomas & Rodrigo Garcia-Verdu & Yingyuan Chen, 2013. "Benchmarking Structural Transformation Across the World," IMF Working Papers 13/176, International Monetary Fund.
  5. Paula Bustos & Bruno Caprettini & Jacopo Ponticelli, 2012. "Agricultural productivity and structural transformation. Evidence from Brazil," Economics Working Papers 1403, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2013.
  6. Pedro S. Amaral & James C. MacGee, 2012. "Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multi-sector Approach," University of Western Ontario, Economic Policy Research Institute Working Papers 20125, University of Western Ontario, Economic Policy Research Institute.
  7. Gollin, Douglas & Rogerson, Richard, 2014. "Productivity, transport costs and subsistence agriculture," Journal of Development Economics, Elsevier, vol. 107(C), pages 38-48.
  8. Timo Boppart & Franziska J. Weiss, 2013. "Non-homothetic preferences and industry directed technical change," ECON - Working Papers 123, Department of Economics - University of Zurich.
  9. Agenor, Pierre-Richard & Dinh, Hinh, 2013. "From Imitation to Innovation: Public Policy for Industrial Transformation," World Bank - Economic Premise, The World Bank, issue 115, pages 1-8, May.

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