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Labor mobility, structural change and economic growth

Author

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  • Jaime Alonso-Carrera

    (Universidade de Vigo)

  • Xavier Raurich

    (Universitat de Barcelona)

Abstract

This paper develops a two-sector growth model in which the process of structural change in the sectoral composition of employment and GDP is jointly determined by non-homothetic preferences and labor mobility cost. This cost, paid by workers moving to another sector, limits structural change. Our model can explain the following patterns of development of the US economy throughout the period 1880-2000: (i) balanced growth of the aggregate variables in the second half of the last century; (ii) structural change in the sectoral composition of employment between agriculture and non-agriculture sectors; (iii) structural change process in the sectoral composition of GDP between these sectors; and (iv) wage convergence between the two sectors. We outline that the last two patterns can only be explained if labor mobility cost is introduced. Results reveal that mobility cost generates a misallocation of production factors. This implies a loss of GDP which amounts to over 30% of the GDP throughout initial periods according to the calibrated model. During the transition, the loss of GDP decreases and eventually vanishes. Thus, the elimination of the misallocation explains part of the increase in the GDP. Additionally, this study points out that misallocation introduces a mechanism through which cross-country differences in sectoral composition may account for cross-country income differences.

Suggested Citation

  • Jaime Alonso-Carrera & Xavier Raurich, 2015. "Labor mobility, structural change and economic growth," UB Economics Working Papers 2015/325, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
  • Handle: RePEc:ewp:wpaper:325web
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    Cited by:

    1. Jaime Alonso-Carrera & Giulia Felice & Xavier Raurich, 2018. "Inequality and Structural Change under Non-Linear Engels' Curve," UB Economics Working Papers 2018/374, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
    2. Mariarosaria Comunale & Giulia Felice, 2019. "An empirical investigation of the relationship between trade and structural change," Bank of Lithuania Working Paper Series 62, Bank of Lithuania.
    3. Li, Shang-ao & Gong, Liutang & Pan, Shan & Luo, Feng, 2020. "Wage and price differences, technology gap and labor flow dynamics," Economic Modelling, Elsevier, vol. 88(C), pages 211-222.
    4. Jaime Alonso-Carrera & María Jesús Freire-Serén & Xavier Raurich, 2017. "Anatomizing the Mechanics of Structural Change," UB Economics Working Papers 2017/360, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
    5. O. S. Sukharev & E. N. Voronchikhina, 2020. "Structural growth policy in Russia: Resources, technology-intensity, risk, and industrialisation," Journal of New Economy, Ural State University of Economics, vol. 21(1), pages 29-52, March.
    6. Edgar Cruz, 2019. "Kuznets meets Lucas: structural change and human capital," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 848-873.
    7. O. Sukharev S. & О. Сухарев С., 2019. "Структурная политика: к новой инвестиционной модели экономического роста // Structural Policy: Towards a New Investment Model of Economic Growth," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 23(2), pages 84-104.
    8. O. Sukharev S. & О. Сухарев С., 2019. "Некоторые императивы экономического лидерства России: развитие науки // Some Imperatives of the Russian Economic Leadership: The Development of Science," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 12(3), pages 25-36.

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    More about this item

    Keywords

    Structural change; Non-homothetic preferences; Labor mobility .;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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