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Testing the growth effects of structural change

Against the backdrop of Baumol’s model of ‘unbalanced growth’, a recent strand of literature has presented models that manage to reconcile structural change with Kaldor’s ‘stylized fact’ of the relative constancy of per-capita GDP growth. Another strand of literature goes beyond this, arguing that the expenditure shifts toward Baumol’s ‘stagnant’ sector stimulate rather than dampen long-term economic growth because of the human capital-accumulating nature of major ‘stagnant’ services (like health care and education). This paper tests the relationship between structural change and economic growth empirically by means of a Granger-causality analysis of a panel of 18 OECD countries.

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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 10-264.

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Length: 34 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:kof:wpskof:10-264
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