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A unified theory of structural change

  • Chris Papageorgiou


    (Louisiana State University)

  • Fidel Pérez Sebastián


    (Universidad de Alicante)

  • María Dolores Guilló Fuentes


    (Universidad de Alicante)

This paper uses dynamic general equilibrium and computational methods, inspired by the multi-sector growth model structure in Stephen Turnovsky’s previous and more recent work, to develop a theory that unifies two of the traditional explanations of structural change: sector-biased technical change and non-homothetic preferences. More specifically, we build a multisector overlapping generations growth model with endogenous technical-change and non-homothetic preferences based on an expanding-variety setup with two different R&D technologies; one for agriculture, and another for non-agriculture. Results give additional support to the biased technical-change hypothesis as an important determinant of the structural transformation. The paper also explores where this bias might come from. Our findings suggest that production-side specific factors, such as asymmetries in cross-sector knowledge spillovers could be behind it, and therefore be important to fully explain the process of structural change.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2010-34.

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Length: 30 pages
Date of creation: Jan 2010
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2010-34
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