Theory and Measurement of Modern Transition
AbstractThe process of modernization is neither instantaneous nor homogeneous across countries. Given the large productivity growth gap between traditional and modern sectors, the gradual and varying degree of transition between these technologies seems puzzling. We develop a theory of transition that resolves this puzzle. The key forces are sector-specific complementarity between work-experience and labor, and exogenous technical progress present only in the modern sector. Using nationally representative micro data from the Socio-Economic Survey of Thailand (1976-1996), we measure the theory by estimating cross-sectional earnings functions, and assess if the model captures the observed dynamics of transition. The model jointly explains the gradual and S-shaped transition, stagnant growth of aggregate earnings, and the rise and fall of experience-earnings profiles in Thailand.
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Bibliographic InfoPaper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 05.31.
Length: 39 pages
Date of creation: Aug 2005
Date of revision:
Modern Transition; Sector-Specific Complementarity; TFP and Inequality;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-29 (All new papers)
- NEP-DEV-2005-10-29 (Development)
- NEP-TRA-2005-10-29 (Transition Economics)
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