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Two Perspectives on Preferences and Structural Transformation

  • Berthold Herrendorf
  • Richard Rogerson
  • ?kos Valentinyi

We assess the empirical importance of changes in income and relative prices for structural transformation in the postwar United States. We explain two natural approaches to the data: sectors may be categories of final expenditure or value added; e.g., the service sector may be the final expenditure on services or the value added from service industries. We estimate preferences for each approach and find that with final expenditure income effects are the dominant force behind structural transformation, whereas with value-added categories price effects are more important. We show how the inputoutput structure of the United States can reconcile these findings.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 7 (December)
Pages: 2752-89

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:7:p:2752-89
Note: DOI: 10.1257/aer.103.7.2752
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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.
  2. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Center for Development Economics 2002-09, Department of Economics, Williams College.
  3. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
  4. Herrendorf, Berthold & Valentinyi, Akos, 2007. "Measuring Factor Income Shares at the Sector Level - A Primer," CEPR Discussion Papers 6271, C.E.P.R. Discussion Papers.
  5. Margarida Duarte & Diego Restuccia, 2009. "The Role of the Structural Transformation in Aggregate Productivity," Working Papers tecipa-348, University of Toronto, Department of Economics.
  6. Ngai, L. Rachel & Pissarides, Christopher A., 2005. "Structural Change in a Multi-Sector Model of Growth," IZA Discussion Papers 1800, Institute for the Study of Labor (IZA).
  7. Atkeson, A. & Ogaki, M., 1991. "Wealth-Varying Intertemporal Elasticities of Substitution Evidence from Panel and Aggregate Data," RCER Working Papers 303, University of Rochester - Center for Economic Research (RCER).
  8. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," MPRA Paper 8413, University Library of Munich, Germany.
  9. Bah, El-hadj M., 2007. "Structural Transformation in Developed and Developing Countries," MPRA Paper 10655, University Library of Munich, Germany, revised 19 Sep 2008.
  10. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  11. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
  12. Messina, Julian, 2006. "The role of product market regulations in the process of structural change," European Economic Review, Elsevier, vol. 50(7), pages 1863-1890, October.
  13. repec:oup:restud:v:68:y:2001:i:4:p:869-82 is not listed on IDEAS
  14. Berthold Herrendorf & James A. Schmitz & Arilton Teixeira, 2009. "Transportation and development: insights from the U.S., 1840-1860," Staff Report 425, Federal Reserve Bank of Minneapolis.
  15. Victor R. Fuchs, 1968. "Some Implications of the Growth of a Service Economy," NBER Chapters, in: The Service Economy, pages 183-199 National Bureau of Economic Research, Inc.
  16. repec:oup:restud:v:67:y:2000:i:3:p:545-61 is not listed on IDEAS
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