IDEAS home Printed from https://ideas.repec.org/p/ewp/wpaper/325web.html
   My bibliography  Save this paper

Labor mobility, structural change and economic growth

Author

Listed:
  • 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 School of Economics Working Papers 2015/325, University of Barcelona School of Economics.
  • Handle: RePEc:ewp:wpaper:325web
    as

    Download full text from publisher

    File URL: http://www.ub.edu/ubeconomics/wp-content/uploads/2015/06/325WEB.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Douglas Gollin & Stephen L. Parente & Richard Rogerson, 2004. "Farm Work, Home Work, and International Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 827-850, October.
    2. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    3. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    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.
    5. Artuc, Erhan & Lederman, Daniel & Porto, Guido, 2015. "A mapping of labor mobility costs in the developing world," Journal of International Economics, Elsevier, vol. 95(1), pages 28-41.
    6. Esteban-Pretel, Julen & Sawada, Yasuyuki, 2014. "On the role of policy interventions in structural change and economic development: The case of postwar Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 67-83.
    7. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
    8. Guriev, Sergei & Tsyvinski, Aleh & Golosov, Mikhail & Cheremukhin, Anton, 2013. "Was Stalin Necessary for Russia?s Economic Development?," CEPR Discussion Papers 9669, C.E.P.R. Discussion Papers.
    9. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
    10. Tomasz Swiecki, 2017. "Determinants of Structural Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 95-131, March.
    11. 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.
    12. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
    13. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 13(Spr), pages 10-25.
    14. Francisco Alvarez-Cuadrado & Markus Poschke, 2011. "Structural Change Out of Agriculture: Labor Push versus Labor Pull," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 127-158, July.
    15. Diego Comin & Danial Lashkari & Martí Mestieri, 2021. "Structural Change With Long‐Run Income and Price Effects," Econometrica, Econometric Society, vol. 89(1), pages 311-374, January.
    16. Rafael Dix‐Carneiro, 2014. "Trade Liberalization and Labor Market Dynamics," Econometrica, Econometric Society, vol. 82(3), pages 825-885, May.
    17. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
    18. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    19. Mr. Sergio Rebelo & Ms. Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    20. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    21. Hatton, Timothy & Williamson, Jeffrey, 1989. "What Explains Wage Gaps Between Farm And City? Exploring The Todaro Model With American Evidence 1890-1941," Harvard Institute of Economic Research (HIER) Archive 294563, Harvard University, Department of Economics.
    22. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    23. Alonso-Carrera, Jaime & Raurich, Xavier, 2015. "Demand-based structural change and balanced economic growth," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 359-374.
    24. Steger, Thomas M., 2001. "Stylised facts of economic growth in developing countries," Wirtschaftswissenschaftliche Diskussionspapiere 08/2001, University of Greifswald, Faculty of Law and Economics.
    25. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    26. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    27. Dennis, Benjamin N. & Iscan, Talan B., 2007. "Productivity growth and agricultural out-migration in the United States," Structural Change and Economic Dynamics, Elsevier, vol. 18(1), pages 52-74, March.
    28. Berthold Herrendorf & Todd Schoellman, 2018. "Wages, Human Capital, and Barriers to Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 1-23, April.
    29. John Laitner, 2000. "Structural Change and Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 545-561.
    30. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
    31. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, August.
    32. Hatton, Timothy J & Williamson, Jeffrey G, 1992. "What Explains Wage Gaps between Farm and City? Exploring the Todaro Model with American Evidence, 1890-1941," Economic Development and Cultural Change, University of Chicago Press, vol. 40(2), pages 267-294, January.
    33. Ngai, L. Rachel, 2004. "Barriers and the transition to modern growth," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1353-1383, October.
    34. 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.
    35. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2007. "The food problem and the evolution of international income levels," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1230-1255, May.
    36. Todd Schoellman & Berthold Herrendorf, 2014. "Wages, Human Capital, and the Allocation of Labor across Sectors," 2014 Meeting Papers 364, Society for Economic Dynamics.
    37. Dennis, Benjamin N. & Iscan, Talan B., 2009. "Engel versus Baumol: Accounting for structural change using two centuries of U.S. data," Explorations in Economic History, Elsevier, vol. 46(2), pages 186-202, April.
    38. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-2789, December.
    39. Helwege, Jean, 1992. "Sectoral Shifts and Interindustry Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 55-84, January.
    40. repec:hal:spmain:info:hdl:2441/382e4c7la19qb8m0mtvar753ei is not listed on IDEAS
    41. 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.
    42. Raurich, Xavier & Sánchez-Losada, Fernando & Vilalta-Bufí, Montserrat, 2015. "Knowledge Misallocation And Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 19(7), pages 1540-1564, October.
    43. Papageorgiou, Chris & Perez-Sebastian, Fidel, 2006. "Dynamics in a non-scale R&D growth model with human capital: Explaining the Japanese and South Korean development experiences," Journal of Economic Dynamics and Control, Elsevier, vol. 30(6), pages 901-930, June.
    44. 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, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Subhasankar Chattopadhyay, 2022. "Pace of structural change and inter‐sectoral relative price: The case of India and China," The World Economy, Wiley Blackwell, vol. 45(11), pages 3534-3558, November.
    2. Zhizhu Yuan & Ye Yang & Bai Liu, 2023. "Labour marketisation level and corporate labour investment efficiency: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4729-4760, December.
    3. 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.
    4. Mariarosaria Comunale & Giulia Felice, 2022. "Trade and structural change: An empirical investigation," International Economics, CEPII research center, issue 171, pages 80-109.
    5. Makarski, Krzysztof & Tyrowicz, Joanna, 2023. "Preference for redistribution during structural change with labor mobility frictions," European Journal of Political Economy, Elsevier, vol. 77(C).
    6. 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.
    7. Xinhai Lu & Zhoumi Li & Hongzheng Wang & Yifeng Tang & Bixia Hu & Mingyue Gong & Yulong Li, 2022. "Evaluating Impact of Farmland Recessive Morphology Transition on High-Quality Agricultural Development in China," Land, MDPI, vol. 11(3), pages 1-19, March.
    8. Jaime Alonso-Carrera & Giulia Felice & Xavier Raurich, 2018. "Inequality and Structural Change under Non-Linear Engels' Curve," UB School of Economics Working Papers 2018/374, University of Barcelona School of Economics.
    9. Edgar Cruz, 2019. "Kuznets meets Lucas: structural change and human capital," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 848-873.
    10. Oleg Sukharev, 2021. "Measuring the Contribution of the “Knowledge Economy” to the Economic Growth Rate: Comparative Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(4), pages 1809-1829, December.
    11. 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.
    12. Jaime Alonso-Carrera & María Jesús Freire-Serén & Xavier Raurich, 2017. "Anatomizing the Mechanics of Structural Change," UB School of Economics Working Papers 2017/360, University of Barcelona School of Economics.
    13. 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.
    14. 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.
    15. Kurose, Kazuhiro, 2021. "Models of structural change and Kaldor’s facts: Critical survey from the Cambridge Keynesian perspective," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 267-277.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    2. Alonso-Carrera, Jaime & Raurich, Xavier, 2015. "Demand-based structural change and balanced economic growth," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 359-374.
    3. Comunale, Mariarosaria & Felice, Giulia, 2022. "Trade and structural change: An empirical investigation," International Economics, Elsevier, vol. 171(C), pages 58-79.
    4. Teignier, Marc, 2018. "The role of trade in structural transformation," Journal of Development Economics, Elsevier, vol. 130(C), pages 45-65.
    5. Chen, Chaoran, 2020. "Technology adoption, capital deepening, and international productivity differences," Journal of Development Economics, Elsevier, vol. 143(C).
    6. van Neuss, Leif, 2018. "Globalization and deindustrialization in advanced countries," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 49-63.
    7. 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.
    8. Fabian Eckert & Michael Peters, 2018. "Spatial Structural Change," 2018 Meeting Papers 98, Society for Economic Dynamics.
    9. Cai, Wenbiao, 2015. "Structural change accounting with labor market distortions," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 54-64.
    10. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.
    11. Jaime Alonso-Carrera & Giulia Felice & Xavier Raurich, 2018. "Inequality and Structural Change under Non-Linear Engels' Curve," UB School of Economics Working Papers 2018/374, University of Barcelona School of Economics.
    12. Monteforte, Fabio, 2020. "Structural change, the push-pull hypothesis and the Spanish labour market," Economic Modelling, Elsevier, vol. 86(C), pages 148-169.
    13. Alvarez-Cuadrado, Francisco & Long, Ngo & Poschke, Markus, 2017. "Capital-labor substitution, structural change and growth," Theoretical Economics, Econometric Society, vol. 12(3), September.
    14. Gangopadhyay, Kausik & Mondal, Debasis, 2021. "Productivity, relative sectoral prices, and total factor productivity: Theory and evidence," Economic Modelling, Elsevier, vol. 100(C).
    15. Marcolino, Marcos, 2022. "Accounting for structural transformation in the U.S," Journal of Macroeconomics, Elsevier, vol. 71(C).
    16. Diego Comin & Danial Lashkari & Martí Mestieri, 2021. "Structural Change With Long‐Run Income and Price Effects," Econometrica, Econometric Society, vol. 89(1), pages 311-374, January.
    17. Jaime Alonso-Carrera & María Jesús Freire-Serén & Xavier Raurich, 2017. "Anatomizing the Mechanics of Structural Change," UB School of Economics Working Papers 2017/360, University of Barcelona School of Economics.
    18. Gray, Elie & Grimaud, André & Le Bris, David, 2018. "The Farmer, the Blue-collar, and the Monk: Understanding economic development through saturations of demands and non-homothetic productivity gains," TSE Working Papers 18-906, Toulouse School of Economics (TSE).
    19. Elie Gray & André Grimaud & David Le Bris, 2018. "The Farmer, the Blue-collar, and the Monk: Understanding Economic Development through Saturations of Demands and Non-Homothetic Productivity Gains," CESifo Working Paper Series 6970, CESifo.
    20. Alvarez-Cuadrado, Francisco & Long, Ngo Van & Poschke, Markus, 2018. "Capital-labor substitution, structural change and the labor income share," Journal of Economic Dynamics and Control, Elsevier, vol. 87(C), pages 206-231.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ewp:wpaper:325web. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: University of Barcelona School of Economics (email available below). General contact details of provider: https://edirc.repec.org/data/feubaes.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.