IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/19839.html
   My bibliography  Save this paper

Sectoral Structural Change in a Knowledge Economy

Author

Listed:
  • Che, Natasha Xingyuan

Abstract

The sectoral composition of the US economy has shifted dramatically in the recent decades. At the same time, knowledge and information capital has become increasingly important in modern production processes. This paper argues that a ready explanation for the recent sectoral structural change lies in the difference of intangible capital accumulation across sectors. In the two-sector model of the paper, as the importance of intangible capital increases, labor is shifted from direct goods production to creating sector-specific intangible capital. In the process, the real output and employment shares of the high-intangible sector increase. The model generates sectoral composition change and labor productivity trend that reasonably match the data. It also shows that conventional labor productivity calculation understates the "true" productivity in sectoral goods production. The underestimation is greater for the growing sector. The empirical regressions of the paper indicate a positive and significant association between intangible capital investment intensity and firms' future output and employment growth. The correlation is higher for firms in the growing sector. At the industry level, controlling for industry human capital intensity, physical capital intensity and IT investment level, intangible capital intensity is positively correlated with future industry real output and employment share growth. These findings are consistent with the implications of the model. The paper also presents evidence suggesting that most growing service industries are intangible capital intensive. Thus the theory developed here can also help to reconcile the expansion of the service sector and the seemingly low productivity of the sector.

Suggested Citation

  • Che, Natasha Xingyuan, 2009. "Sectoral Structural Change in a Knowledge Economy," MPRA Paper 19839, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19839
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/19839/1/MPRA_paper_19839.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brynjolfsson, Erik, 2013. "Wired for Innovation: How Information Technology Is Reshaping the Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518611, December.
    2. Oulton, Nicholas, 2001. "Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 605-627, October.
    3. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    4. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    5. Carol Corrado & Charles Hulten & Daniel Sichel, 2005. "Measuring Capital and Technology: An Expanded Framework," NBER Chapters, in: Measuring Capital in the New Economy, pages 11-46, National Bureau of Economic Research, Inc.
    6. Erik Brynjolfsson, 1994. "Information Assets, Technology and Organization," Management Science, INFORMS, vol. 40(12), pages 1645-1662, December.
    7. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    8. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    9. Higson, Chris, 2001. "Intangibles: Management, Measurement, and Reporting: by Baruch Lev, Washington, DC, Brookings Institution Press, 2001, pp. viii+216," The International Journal of Accounting, Elsevier, vol. 36(4), pages 501-503, 012.
    10. Jean-Pierre Danthine & Xiangrong Jin, 2007. "Intangible capital, corporate valuation and asset pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 157-177, July.
    11. Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1, January.
    12. Esteban Rossi-Hansberg & Mark L. J. Wright, 2007. "Establishment Size Dynamics in the Aggregate Economy," American Economic Review, American Economic Association, vol. 97(5), pages 1639-1666, December.
    13. Ms. Piyabha Kongsamut & Danyang Xie & Mr. Sergio Rebelo, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    14. Ellen R. McGrattan & Edward C. Prescott, 2010. "Unmeasured Investment and the Puzzling US Boom in the 1990s," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 88-123, October.
    15. Francisco J. Buera & Joseph P. Kaboski, 2012. "The Rise of the Service Economy," American Economic Review, American Economic Association, vol. 102(6), pages 2540-2569, October.
    16. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and Measuring Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1026-1053, October.
    17. Corrado, Carol & Haltiwanger, John & Sichel, Daniel (ed.), 2005. "Measuring Capital in the New Economy," National Bureau of Economic Research Books, University of Chicago Press, number 9780226116129.
    18. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    19. Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Introduction to "Measuring Capital in the New Economy"," NBER Chapters, in: Measuring Capital in the New Economy, pages 1-10, National Bureau of Economic Research, Inc.
    20. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    21. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-258, June.
    22. John Laitner, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 545-561.
    23. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marie Le Mouel & Mariagrazia Squicciarini, 2015. "Cross-Country Estimates of Employment and Investment in Organisational Capital: A Task-Based Methodology Using the PIAAC Database," Discussion Papers of DIW Berlin 1522, DIW Berlin, German Institute for Economic Research.
    2. Marie Le Mouel & Mariagrazia Squicciarini, 2015. "Cross-Country Estimates of Employment and Investment in Organisational Capital: A Task-Based Methodology Using Piaac Data," OECD Science, Technology and Industry Working Papers 2015/8, OECD Publishing.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Che, Natasha Xingyuan, 2009. "The great dissolution: organization capital and diverging volatility puzzle," MPRA Paper 13701, University Library of Munich, Germany.
    2. Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2015. "Endowment structures, industrial dynamics, and economic growth," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 244-263.
    3. Mitra, Shalini, 2018. "Intangible Capital and the Rise in Wage and Hours Volatility," MPRA Paper 89697, University Library of Munich, Germany.
    4. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    5. Garriga, Carlos & Hedlund, Aaron & Tang, Yang & Wang, Ping, 2021. "Rural-urban migration and house prices in China," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    6. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
    7. Georg Duernecker & Berthold Herrendorf, 2022. "Structural Transformation of Occupation Employment," Economica, London School of Economics and Political Science, vol. 89(356), pages 789-814, October.
    8. Hartwig, Jochen, 2012. "Testing the growth effects of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 11-24.
    9. Mehra, Rajnish, 2010. "Indian Equity Markets: Measures of Fundamental Value," India Policy Forum, National Council of Applied Economic Research, vol. 6(1), pages 1-38.
    10. HOSONO Kaoru & MIYAKAWA Daisuke & TAKIZAWA Miho & YAMANOUCHI Kenta, 2016. "Complementarity and Substitutability between Tangible and Intangible Capital: Evidence from Japanese firm-level data," Discussion papers 16024, Research Institute of Economy, Trade and Industry (RIETI).
    11. Nicholas Oulton, 2016. "The Mystery of TFP," International Productivity Monitor, Centre for the Study of Living Standards, vol. 31, pages 68-87, Fall.
    12. Afolabi Tunde Ahmed & Tsimisaraka Raymondo Sandra Marcelline & Sabi Couscous Mouhamadou Nazirou, 2021. "Empirical Study of the Impact of Governance on Economic Structural Change: Evidence from Sub-Saharan African Countries," International Journal of Science and Business, IJSAB International, vol. 5(8), pages 260-277.
    13. Martin Falk, 2013. "New Empirical Findings for International Investment in Intangible Assets. WWWforEurope Working Paper No. 30," WIFO Studies, WIFO, number 46891, January.
    14. Ellen R. McGrattan & Eduard C. Prescott, 2006. "Why Did U.S. Market Hours Boom in the 1990s?," 2006 Meeting Papers 192, Society for Economic Dynamics.
    15. Mitra, Shalini, 2019. "Intangible capital and the rise in wage and hours volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 70-85.
    16. Manuel García‐Santana & Josep Pijoan‐Mas & Lucciano Villacorta, 2021. "Investment Demand and Structural Change," Econometrica, Econometric Society, vol. 89(6), pages 2751-2785, November.
    17. Dalila Nicet-Chenaf & Eric Rougier, 2009. "Human capital and structural change: how do they interact with each other in growth?," Post-Print hal-00389040, HAL.
    18. Ye Li, 2018. "Fragile New Economy: The Rise of Intangible Capital and Financial Instability," 2018 Meeting Papers 1189, Society for Economic Dynamics.
    19. Fedderke, Johannes W., 2018. "Exploring unbalanced growth: Understanding the sectoral structure of the South African economy," Economic Modelling, Elsevier, vol. 72(C), pages 177-189.
    20. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio, 2017. "Knowledge Spillovers, ICT and Productivity Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 592-618, August.

    More about this item

    Keywords

    Intangible Capital; Structural Change; Knowledge Economy; Firm Investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19839. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.