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Scale and the origins of structural change

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  • Buera, Francisco J.
  • Kaboski, Joseph P.

Abstract

We consider broad patterns of structural change: (i) sectoral reallocations, (ii) rich movements of productive activities between home and market, and (iii) an increase in establishment size, especially in manufacturing. We extend these facts and develop a unified model explaining them. The crucial distinction across manufacturing, services and home production is the scale of the productive unit. In manufacturing, scale technologies lead to industrialization and marketization. In services, they lead to marketization and later demarketization of services. A later increase in the scale of services could yield a decline in industry and a rise in services, consistent with the data.

Suggested Citation

  • Buera, Francisco J. & Kaboski, Joseph P., 2012. "Scale and the origins of structural change," Journal of Economic Theory, Elsevier, vol. 147(2), pages 684-712.
  • Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:684-712
    DOI: 10.1016/j.jet.2010.11.007
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    More about this item

    Keywords

    Structural change; Efficient scale; Home production; Product cycles;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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