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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.
    4. Xu, Mengmeng & Tan, Ruipeng, 2021. "Removing energy allocation distortion to increase economic output and energy efficiency in China," Energy Policy, Elsevier, vol. 150(C).
    5. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    6. Sinha Rishabh, 2021. "Sectoral Productivity Gaps and Aggregate Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(1), pages 37-71, January.
    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.
    8. Mondal, Debasis, 2019. "Structural transformation and productivity growth in India during 1960–2010," Economic Modelling, Elsevier, vol. 82(C), pages 401-419.
    9. Ye, Longfeng & Robertson, Peter E., 2019. "Hitting the Great Wall: Structural change and China's growth slowdown," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    10. Qiao, Sen & Zhao, Dong Hao & Guo, Zi Xin & Tao, Zhang, 2022. "Factor price distortions, environmental regulation and innovation efficiency: An empirical study on China's power enterprises," Energy Policy, Elsevier, vol. 164(C).
    11. Dongwu Wu & Linlin Wu & Yongbo Ye, 2022. "RETRACTED ARTICLE: Industrial structure optimization, economic development factors and regional economic risk prevention in post COVID-19 period: empirical analysis based on panel data of Guangdong re," Journal of Combinatorial Optimization, Springer, vol. 44(5), pages 3735-3777, December.

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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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