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Structural Change, Market Size and Sector Specific Endogenous Growth

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  • Timo Boppart
  • Franziska J. Weiss

Abstract

In the course of growth, sectoral data features (i) changing relative expenditures of different sectors, (ii) non-constancy in the growth rates of relative prices and (iii) shifting relative TFP growth rates of sectors. This paper presents a simple model of directed technical change, which is able to reconcile these findings and in which structural change is driven by both a demand-side and a supply-side effect. Our theory and the input-output tables of the U.S. allow us to reconstruct how the structural change in terms of final consumption affected the market size of industry value added. Arguing that the structural change across broad categories of final consumption is exogenous from the perspective of an individual firm, this gives us an instrument for the industrial market size. We then empirically test for the market size effect of induced innovation. Our findings suggest that a 1 percent increase in market size leads to an increase of about 0:25 percentage points of the TFP growth rate.

Suggested Citation

  • Timo Boppart & Franziska J. Weiss, 2012. "Structural Change, Market Size and Sector Specific Endogenous Growth," DEGIT Conference Papers c017_062, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c017_062
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    References listed on IDEAS

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    6. Timo Boppart, 2014. "Structural Change and the Kaldor Facts in a Growth Model With Relative Price Effects and Non‐Gorman Preferences," Econometrica, Econometric Society, vol. 82, pages 2167-2196, November.
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    Cited by:

    1. Chen, Guo, 2013. "Health costs, factor productivity and foreign direct investment flows," Master's Theses and Plan B Papers 157717, University of Minnesota, Department of Applied Economics.

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    More about this item

    Keywords

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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