Balanced Growth With Structural Change
We study a multi-sector model of growth with differences in TFP growth rates across sectorsand derive sufficient conditions for the coexistence of a balanced aggregate growth path, withall aggregates growing at the same rate, and structural change, characterized by sectoral laborreallocation. The conditions needed are weak restrictions on the utility and productionfunctions: goods should be poor substitutes and the intertemporal elasticity of substitutionshould be one. We present evidence from US and UK sectors, that is consistent with ourconclusions and successfully calibrate the shift from agriculture to manufacturing andservices in the United States.
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