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Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences

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  • Timo Boppart

Abstract

Growth of per-capita income is associated with (i) significant shifts in the sectoral economic structure, (ii) systematic changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic expenditure structure difference between rich and poor households. Ngai and Pissarides (2006) and Acemoglu and Guerrieri (2008) are consistent with observation (i)-(iii) but abstract form non-homotheticities of preferences. However, they cannot replicate the structural change between the U.S. goods and service sector quantitatively. This paper presents a growth model, which reconciles both forces of structural change - relative price and income effects - with balanced growth on the aggregate. The theory is simple and parsimonious and contains an analytical solution. The model can replicate shape and magnitude of the nonbalanced sectoral facts as well as the balanced nature of growth on the aggregate. In a structural estimation, the model’s functional form is exploited to obtain estimates for the relative importance of income and price effects as determinants of the structural change.

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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 002.

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Date of creation: Jan 2011
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Handle: RePEc:zur:econwp:002

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Keywords: Structural change; relative price effect; non-Gorman preferences; Kaldor facts.;

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  1. 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. Ngai, L. Rachel & Petrongolo, Barbara, 2014. "Gender Gaps and the Rise of the Service Economy," IZA Discussion Papers 8134, Institute for the Study of Labor (IZA).
  2. Jaime Alonso-Carrera & Xavier Raurich, 2014. "Demand-based structural change and balanced economic growth," UB Economics Working Papers 2014/303, Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics.
  3. Richard Rogerson & Akos Valentinyi & Berthold Herrendorf, 2007. "Growth and Structural Transformation," 2007 Meeting Papers 757, Society for Economic Dynamics.
  4. Timo Boppart, 2013. "Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences," 2013 Meeting Papers 217, Society for Economic Dynamics.
  5. Timo Boppart & Franziska J. Weiss, 2013. "Non-homothetic preferences and industry directed technical change," ECON - Working Papers 123, Department of Economics - University of Zurich.

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