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Demand bias as an explanation for structural change

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  • Gundlach, Erich

Abstract

An income elastic demand for services is usually regarded as one of the major explanations for the observed pattern of structural change in the world economy. Recent empirical findings cast some doubt on this demand-bias hypothesis. This paper presents a simple model of structural change that allows an assessment of the implications of alternative demand elasticities. The analysis focusses on restrictions for the set of consistent parameter values derived from demand theory. The results show that lagging productivity growth in the service sector and a homothetic or income inelastic demand for services do not suffice to explain the stylized facts.

Suggested Citation

  • Gundlach, Erich, 1993. "Demand bias as an explanation for structural change," Kiel Working Papers 594, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:594
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    1. Victor R. Fuchs, 1980. "Economic Growth and the Rise of Service Employment," NBER Working Papers 0486, National Bureau of Economic Research, Inc.
    2. Locay, Luis, 1990. "Economic Development and the Division of Production between Households and Markets," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 965-982, October.
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    7. Gundlach, Erich, 1993. "Die Dienstleistungsnachfrage als Determinante des wirtschaftlichen Strukturwandels," Open Access Publications from Kiel Institute for the World Economy 763, Kiel Institute for the World Economy (IfW Kiel).
    8. David L. Hammes, & Jean‐Jacques Rosa and & Herbert G. Grubel, 1989. "The National Accounts, Household Service Consumption and its Monetization," Kyklos, Wiley Blackwell, vol. 42(1), pages 3-15, February.
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    Cited by:

    1. de Groot, H.L.F., 1998. "The Determination and Development of Sectoral Structure," Discussion Paper 1998-125, Tilburg University, Center for Economic Research.

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