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Sectoral Technology and Structural Transformation

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  • Herrendorf, Berthold
  • Herrington, Christopher
  • Valentinyi, Akos

Abstract

This paper assesses how structural transformation is affected by sectoral differences in labor-augmenting technological progress, capital intensity, and substitutability between capital and labor. We estimate CES production functions for agriculture, manufacturing, and services on postwar US data and compare them with Cobb--Douglas production functions with different and with equal capital shares. We find that sectoral differences in labor-augmenting technological progress are the dominant force behind changes in sectoral labor and in relative prices. As a result, Cobb--Douglas production functions with equal capital shares (which by construction abstract from differences in capital intensity and the elasticity of substitution) capture the main economic forces on the technology side behind postwar US structural transformation.

Suggested Citation

  • Herrendorf, Berthold & Herrington, Christopher & Valentinyi, Akos, 2013. "Sectoral Technology and Structural Transformation," CEPR Discussion Papers 9386, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9386
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    References listed on IDEAS

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    1. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    2. Berthold Herrendorf & Ákos Valentinyi, 2012. "Which Sectors Make Poor Countries So Unproductive?," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 323-341, April.
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    4. Berthold Herrendorf & Todd Schoellman, 2015. "Why is Measured Productivity so Low in Agriculture?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 1003-1022, October.
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    12. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
    13. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," CERS-IE WORKING PAPERS 0803, Institute of Economics, Centre for Economic and Regional Studies.
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    More about this item

    Keywords

    CES production function; Cobb-Douglas production function; elasticity of substitution; structural transformation;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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