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Structural change accounting with labor market distortions

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  • Cai, Wenbiao

Abstract

This paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the U.S., India, Mexico and Brazil between 1960 and 2005. I use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital. I incorporate these distortions into a model of structural change, and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country. Counterfactuals reveal that (1) TFP growth in agriculture drives most of the decline in its share of labor; (2) the role of labor market distortions is limited.

Suggested Citation

  • Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    • Handle: RePEc:eee:dyncon:v:57:y:2015:i:c:p:54-64
    DOI: 10.1016/j.jedc.2015.05.006
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    3. Marcolino, Marcos Araujo & Costa, Daniela, 2022. "Structural Transformation and Labor Productivity in Brazil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 75(4), February.
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    7. Fu Qiao & Yan Yan, 2020. "How does stock market reflect the change in economic demand? A study on the industry-specific volatility spillover networks of China's stock market during the outbreak of COVID-19," Papers 2007.07487, arXiv.org.
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    More about this item

    Keywords

    Structural change; Productivity; Distortions;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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