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Balanced Growth With Structural Change

Author

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  • L. Rachel Ngai
  • Christopher A. Pissarides

Abstract

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.

Suggested Citation

  • L. Rachel Ngai & Christopher A. Pissarides, 2004. "Balanced Growth With Structural Change," CEP Discussion Papers dp0627, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0627
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    References listed on IDEAS

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    1. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    2. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    3. Baumol, William J & Blackman, Sue Anne Batey & Wolff, Edward N, 1985. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 806-817, September.
    4. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
    5. Douglas Gollin & Steven Parente & Richard Rogerson, 2003. "Structural Transformation and Cross-Country Income Differences," Levine's Working Paper Archive 506439000000000259, David K. Levine.
    6. Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Francesco Caselli & Silvana Tenreyro, 2006. "Is Poland the Next Spain?," NBER Chapters,in: NBER International Seminar on Macroeconomics 2004, pages 459-533 National Bureau of Economic Research, Inc.
    2. Roberto Samaniego & Juliana Sun, 2016. "Productivity Growth and Structural Transformation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 266-285, July.
    3. Jaime Alonso-Carrera & Xavier Raurich, 2006. "Growth, Sectoral Composition, and the Wealth of Nations," Working Papers 278, Barcelona Graduate School of Economics.
    4. Dobrescu, Emilian, 2011. "Sectoral Structure and Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-36, September.
    5. Roberto Samaniego, 2013. "Stages of Diversification and Industry Productivity Differences," 2013 Meeting Papers 774, Society for Economic Dynamics.

    More about this item

    Keywords

    structural change; balanced growth; total factor productivity;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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