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A Simple Theory of Structural Transformation

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Abstract

The paper presents a theory of the industrial transformation amongst sectors using endogenous growth theory. Allowing only a slight upward trend in the productivity of the human capital sector, combined with ascending degrees of human capital shares of sectoral output, in say, agriculture, manufacturing and services, output gradually shifts relatively over time from agriculture to manufacturing and to services. Abstracting from international trade theory, sectors intensive in the factor that is becoming relatively more plentiful find their relative outputs expanding. Adding more sectors of greater human capital intensity causes labor time to decrease within each sector, as shown for agriculture, and in general for any number of sectors.

Suggested Citation

  • Gillman, Max, 2011. "A Simple Theory of Structural Transformation," Cardiff Economics Working Papers E2011/4, Cardiff University, Cardiff Business School, Economics Section, revised May 2011.
    • Handle: RePEc:cdf:wpaper:2011/4
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    File URL: http://carbsecon.com/wp/E2011_4.pdf
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    References listed on IDEAS

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    1. Boldrin, Michele & Levine, David K., 2008. "Perfectly competitive innovation," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 435-453, April.
    2. Mundlak, Yair, 2003. "Economic Growth: Lessons From Two Centuries Of American Agriculture," Discussion Papers 14986, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    3. Michele Boldrin & David K. Levine, 2009. "A Model of Discovery," American Economic Review, American Economic Association, vol. 99(2), pages 337-342, May.
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    More about this item

    Keywords

    Human Capital Intensity; Sectoral Allocation; Labor Shares; Secular Endogenous Growth;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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