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Sectoral Technology and Structural Transformation

  • Berthold Herrendorf

    (Arizona State University)

  • Akos Valentinyi

    (Cardiff Business School)

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    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.

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    File URL: https://www.economicdynamics.org/meetpapers/2013/paper_349.pdf
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    Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 349.

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    Date of creation: 2013
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    Handle: RePEc:red:sed013:349
    Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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    1. Berthold Herrendorf & Todd Schoellman, . "Why is Measured Productivity so Low in Agriculture?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    2. 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, 06.
    3. León-Ledesma, Miguel A. & McAdam, Peter & Willman, Alpo, 2009. "Identifying the elasticity of substitution with biased technical change," Working Paper Series 1001, European Central Bank.
    4. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
    5. 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.
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