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Structural Change in a Multi-Sector Model of Growth

  • Ngai, Liwa Rachel
  • Pissarides, Christopher

We study a multi-sector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labour reallocation, and constant aggregate growth path. The conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists. We present evidence from US two-digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services. We show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4763.

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Date of creation: Nov 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4763
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  1. L. Rachel Ngai & Christopher Pissarides, 2004. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 3550, London School of Economics and Political Science, LSE Library.
  2. Foellmi, Reto & Zweimüller, Josef, 2002. "Structural Change and the Kaldor Facts of Economic Growth," CEPR Discussion Papers 3300, C.E.P.R. Discussion Papers.
  3. Donghoon Lee & Kenneth I. Wolpin, 2006. "Intersectoral Labor Mobility and the Growth of the Service Sector," Econometrica, Econometric Society, vol. 74(1), pages 1-46, 01.
  4. Temple, Jonathan, 2001. "Structural Change and Europe's Golden Age," CEPR Discussion Papers 2861, C.E.P.R. Discussion Papers.
  5. 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 806-17, September.
  6. repec:oup:restud:v:68:y:2001:i:4:p:869-82 is not listed on IDEAS
  7. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 01/85, International Monetary Fund.
  8. Messina, Julian, 2006. "The role of product market regulations in the process of structural change," European Economic Review, Elsevier, vol. 50(7), pages 1863-1890, October.
  9. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  10. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, December.
    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, December.
  11. Oulton, Nicholas, 2001. "Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 605-27, October.
  12. Falvey, Rodney E & Gemmell, Norman, 1996. "Are Services Income-Elastic? Some New Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(3), pages 257-69, September.
  13. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-96.
  14. 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.
  15. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  16. Daniel E. Sichel, 2000. "The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 367-370, August.
  17. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June.
  18. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, June.
  19. repec:oup:restud:v:67:y:2000:i:3:p:545-61 is not listed on IDEAS
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