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Structural Change in a Multisector Model of Growth

  • L. Rachel Ngai
  • Christopher A. Pissarides

We study a multisector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation and balanced aggregate growth. The conditions are weak restrictions on the utility and production functions. Along the balanced growth path, labor employed in the production of consumption goods gradually moves to the sector with the lowest TFP growth rate, until in the limit it is the only sector with nontrivial employment of this kind. The employment shares of intermediate and capital goods remain constant during the reallocation process. (JEL O41)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.1.429
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 1 (March)
Pages: 429-443

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:1:p:429-443
Note: DOI: 10.1257/aer.97.1.429
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  1. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-96.
  2. Reto Foellmi & Josef Zweilmueller, 2006. "Structural Change and the Kaldor Facts of Economic Growth," 2006 Meeting Papers 342, Society for Economic Dynamics.
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