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Scale and the origins of structural change

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  • Francisco J. Buera
  • Joseph P. Kaboski

Abstract

Structural change involves a broad set of trends: (i) sectoral reallocations, (ii) rich movements of productive activities between home and market, and (iii) an increase in the scale of productive units. After extending these facts, we develop a model to explain them within a unified framework. The crucial distinction between manufacturing, services, and home production is the scale of the productive unit. Scale technologies give rise to industrialization and the marketization of previously home produced activities. The rise of mass consumption leads to an expansion of manufacturing, but a reversal of the marketization process for service industries. Finally, the later growth in the scale of services leads to a decline in industry and a rise in services.

Suggested Citation

  • Francisco J. Buera & Joseph P. Kaboski, 2008. "Scale and the origins of structural change," Working Paper Series WP-08-06, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-08-06
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    Keywords

    Service industries;

    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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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