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Balanced Growth With Structural Change

  • L. Rachel Ngai
  • Christopher A. Pissarides

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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File URL: http://cep.lse.ac.uk/pubs/download/dp0627.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0627.

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Date of creation: Apr 2004
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Handle: RePEc:cep:cepdps:dp0627
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Kongsamut, Piyabha & Rebelo, Sérgio & Xie, Danyang, 1997. "Beyond Balanced Growth," CEPR Discussion Papers 1693, C.E.P.R. Discussion Papers.
  2. Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
  3. Douglas Gollin & Steven Parente & Richard Rogerson, 2003. "Structural Transformation and Cross-Country Income Differences," Levine's Working Paper Archive 506439000000000259, David K. Levine.
  4. Baumol, William J. & Batey Blackman, Sue Anne & Wolff, Edward N., 1984. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," Working Papers 84-02, C.V. Starr Center for Applied Economics, New York University.
  5. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  6. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
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