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Industrial Dynamics And The Neoclassical Growth Model

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  • WILLIAM F. BLANKENAU
  • STEVEN P. CASSOU

Abstract

This paper studies industry‐level dynamics and demonstrates the ability of a modified neoclassical growth model to capture a range of empirical facts. The paper begins by using U.S. data to document skilled and unskilled labor trends within industry sector classifications as well as industry sector output trends. Using Current Population Survey data from 1968 to 2004, it is shown that the ratio of skilled workers to unskilled workers employed has risen in all industries. The absolute increase in this ratio was larger in the more skilled industries, while the growth rate was larger in the less skilled industries. Furthermore, using national income account data, it is shown that relatively high‐skilled industries have accounted for an increasing share of output over time. A version of the neoclassical growth model is then constructed to match these observations. One important feature of this model is a structure that introduces new goods into the economy at each moment of time. The model is able to capture a rich set of labor market movements between sectors and between skill levels as well as changes in the relative output shares across industries, yet preserves many nice features of the neoclassical growth model.(JEL E13, J20, 030)

Suggested Citation

  • William F. Blankenau & Steven P. Cassou, 2009. "Industrial Dynamics And The Neoclassical Growth Model," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 815-837, October.
  • Handle: RePEc:bla:ecinqu:v:47:y:2009:i:4:p:815-837
    DOI: 10.1111/j.1465-7295.2008.00192.x
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    Cited by:

    1. Steven Cassou & Jesús Vázquez, 2014. "Employment comovements at the sectoral level over the business cycle," Empirical Economics, Springer, vol. 46(4), pages 1301-1323, June.

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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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