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Reconciling Kuznets and Habbakuk in a Unified Growth Theory

  • Alex Mourmouras
  • Peter Rangazad

    ()

    (Department of Economics, Indiana Unviersity-Purdue University Indianapolis)

Economic historians have debated the relative labor productivity of the United States agricultural sector during the 19th century. David (2005) offers a reconciliation of the opposing views by suggesting that while productivity per hour worked in agriculture was high, the number of hours worked per year was low. We model and extend a version of Davis’s reconciliation within a unified growth theory that connections the structural transformation away from traditional agriculture to several other features of United States development. Similar to David, our model predicts an almost two-fold annual workerproductivity advantage in the modern (industrial) sector of the economy, entirely due to greater hours worked per year. The dynamic general equilibrium model is consistent with the structural transformation having minor direct and indirect effects on aggregate labor productivity per hour, but substantial effects on aggregate labor productivity per worker. The model also provides a reasonable match to the trends in schooling, fertility, rates of return to physical capital, and labor productivity growth over the two centuries.

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File URL: http://www.iupui.edu/~econ/workingpapers/wp200704.pdf
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Paper provided by Indiana University-Purdue University Indianapolis, Department of Economics in its series Working Papers with number wp200704.

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Length: 58 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:iup:wpaper:wp200704
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