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Structural Change in an Open Economy

Author

Listed:
  • Kei-Mu Yi

    (Federal Reserve Bank of Philadelphia)

  • Jing Zhang

    (University of Michigan)

Abstract

We develop a tractable, three-sector model to study structural change in an open economy. The model features an endogenous pattern of trade dictated by comparative advantage. We derive an intuitive expression linking sectoral employment shares to sectoral expenditure shares and to sectoral net export shares of total GDP. Changes in productivity and in trade barriers affect expenditure and net export shares, and thus, employment shares, across sectors. We show how these driving forces can generate the "hump" pattern that characterizes the manufacturing employment share as a country develops, even when manufacturing is the sector with the highest productivity growth.

Suggested Citation

  • Kei-Mu Yi & Jing Zhang, 2010. "Structural Change in an Open Economy," Working Papers 595, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:595
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    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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