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The structural transformation and aggregate productivity in Portugal

  • Margarida Duarte

    ()

  • Diego Restuccia

    ()

We document the substantial process of structural transformation -the reallocation of labor between agriculture, manufacturing, and services- and aggregate productivity growth undergone by Portugal between 1956 and 1995. In this paper, we assess the quantitative role of sectoral productivity in accounting for these processes. We calibrate a model of the structural transformation to data for the United States and use the model to gain insight into the factors driving the structural transformation and aggregate productivity growth in Portugal. The model implies that Portugal features low and roughly constant relative productivity in agriculture and services (around 22 percent) and a modest but growing relative productivity in manufacturing (from 44 to 110 percent). We find that productivity growth in manufacturing accounts for most of the reduction of the aggregate productivity gap with the United States and that further substantial improvements in relative aggregate productivity can only be accomplished via improvements in the relative productivity of the service sector.

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File URL: http://hdl.handle.net/10.1007/s10258-006-0016-3
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Article provided by Springer in its journal Portuguese Economic Journal.

Volume (Year): 6 (2007)
Issue (Month): 1 (April)
Pages: 23-46

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Handle: RePEc:spr:portec:v:6:y:2007:i:1:p:23-46
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  1. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
  2. Margarida Duarte & Diego Restuccia, 2009. "The Role of the Structural Transformation in Aggregate Productivity," Working Papers tecipa-348, University of Toronto, Department of Economics.
  3. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  4. Ngai, L. Rachel & Pissarides, Christopher A., 2005. "Structural Change in a Multi-Sector Model of Growth," IZA Discussion Papers 1800, Institute for the Study of Labor (IZA).
  5. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
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  7. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  8. Richard Rogerson, 2006. "Structural Transformation and the Labor Market," 2006 Meeting Papers 256, Society for Economic Dynamics.
  9. Diego Restuccia & Dennis Tao Yang & Xiaodong Zhu, 2007. "Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis," Working Papers e07-3, Virginia Polytechnic Institute and State University, Department of Economics.
  10. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
  11. Tiago Cavalcanti, 2007. "Business cycle and level accounting: the case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 47-64, April.
  12. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 235-259, 04.
  13. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  14. André Silva, 2008. "Taxes and labor supply: Portugal, Europe, and the United States," Portuguese Economic Journal, Springer, vol. 7(2), pages 101-124, August.
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