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Sectoral Technology and Structural Transformation

Author

Listed:
  • Berthold Herrendorf

    (Arizona State University)

  • Akos Valentinyi

    (Cardiff Business School)

Abstract

This paper assesses how structural transformation is affected by sectoral differences in labor-augmenting technological progress, capital intensity, and substitutability between capital and labor. We estimate CES production functions for agriculture, manufacturing, and services on postwar US data and compare them with Cobb-Douglas production functions with different and with equal capital shares. We find that sectoral differences in labor-augmenting technological progress are the main force behind the trends in observed sectoral labor and relative prices. As a result, Cobb-Douglas production functions with equal capital shares (which by construction abstract from differences in capital intensity and the elasticity of substitution) capture the main economic forces behind postwar US structural transformation that originate on the technology side.

Suggested Citation

  • Berthold Herrendorf & Akos Valentinyi, 2013. "Sectoral Technology and Structural Transformation," 2013 Meeting Papers 349, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:349
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    References listed on IDEAS

    as
    1. Berthold Herrendorf & Ákos Valentinyi, 2012. "Which Sectors Make Poor Countries So Unproductive?," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 323-341, April.
    2. Berthold Herrendorf & Todd Schoellman, 2015. "Why is Measured Productivity so Low in Agriculture?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 1003-1022, October.
    3. Ezra Oberfield & Devesh Raval, 2012. "Micro data and macro technology," Working Paper Series WP-2012-11, Federal Reserve Bank of Chicago.
    4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    5. Fair, Ray C, 1970. "The Estimation of Simultaneous Equation Models with Lagged Endogenous Variables and First Order Serially Correlated Errors," Econometrica, Econometric Society, vol. 38(3), pages 507-516, May.
    6. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-452, May.
    7. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    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. 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.
    10. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
    11. Berthold Herrendorf & Christopher Herrington & Ákos Valentinyi, 2015. "Sectoral Technology and Structural Transformation," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 104-133, October.
    12. Miguel A. León-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-1357, September.
    13. Yoosoon Chang & Joon Y. Park & Peter C. B. Phillips, 2001. "Nonlinear econometric models with cointegrated and deterministically trending regressors," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-36.
    14. Sato, Kazuo, 1976. "The Meaning and Measurement of the Real Value Added Index," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 434-442, November.
    15. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
    16. Berthold Herrendorf & Todd Schoellman, 2017. "Wages, Human Capital, and Structural Transformation," CESifo Working Paper Series 6426, CESifo.
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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