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Structural change and the income of nations

Author

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  • Cynthia Armas

    (Universitat de Barcelona)

  • Fernando Sánchez-Losada

    (Universitat de Barcelona)

Abstract

An increase in the supply of skilled labor has been common across the world. However, despite the rise in skilled labor force, not all countries have achieved high income levels, even when their structural transformation follows the same path (from agriculture to industry and, then, from industry to services). Skilled workers might end up in either high or low TFP sectors, according to two opposite theories of structural change (skill-biased structural transformation and stagnant structural transformation). We show that directed technical change is needed to achieve skill-biased structural transformation and, therefore, skilled workers are allocated to high TFP sectors. We present macrodata and microdata evidence to identify the existence of directed technical change. We reveal that in the U.S., South Korea and France, skilled workers have ended up in high TFP sectors due to the existence of directed technical change in the process of structural transformation, but not in Canada. There is a lack of clear evidence for Italy and Spain.

Suggested Citation

  • Cynthia Armas & Fernando Sánchez-Losada, 2021. "Structural change and the income of nations," UB School of Economics Working Papers 2021/412, University of Barcelona School of Economics.
  • Handle: RePEc:ewp:wpaper:412web
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    File URL: http://hdl.handle.net/2445/177578
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    More about this item

    Keywords

    Structural change; directed technical change; unskilled and skilled sectors.;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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