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Sectoral Technology and Structural Transformation

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  • Berthold Herrendorf

    (Arizona State University)

  • Akos Valentinyi

    (Cardiff Business School)

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    Abstract

    This paper assesses how structural transformation is affected by sectoral differences in labor-augmenting technological progress, capital intensity, and substitutability between capital and labor. We estimate CES production functions for agriculture, manufacturing, and services on postwar US data and compare them with Cobb-Douglas production functions with different and with equal capital shares. We find that sectoral differences in labor-augmenting technological progress are the main force behind the trends in observed sectoral labor and relative prices. As a result, Cobb-Douglas production functions with equal capital shares (which by construction abstract from differences in capital intensity and the elasticity of substitution) capture the main economic forces behind postwar US structural transformation that originate on the technology side.

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    Bibliographic Info

    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 349.

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    Date of creation: 2013
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    Handle: RePEc:red:sed013:349

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    1. Miguel A. Le�n-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-57, September.
    2. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
    3. Todd Schoellman & Berthold Herrendorf, 2012. "Why is Measured Productivity so Low in Agriculture?," 2012 Meeting Papers 75, Society for Economic Dynamics.
    4. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
    5. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
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    Cited by:
    1. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941 Elsevier.
    2. Francisco ALVAREZ-CUADRADO & Ngo Van LONG & Markus POSCHKE, 2014. "Capital-Labor Substitution, Structural Change and the Labor Income Share," Cahiers de recherche 01-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Giuseppe Berlingieri, 2013. "Outsourcing and the rise in services," LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, LSE Library.

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