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Structural Transformations with Long-Run Price and Income Effects

Author

Listed:
  • Marti Mestieri

    (Toulouse School of Economics)

  • Danial Lashkari

    (Harvard University)

  • Diego Comin

    (Harvard Business School)

Abstract

We present a multi-sector model of growth that accommodates long-run real income effects and sectoral price trends. Consistent with post-war data from OECD countries, our model generates constant aggregate growth rates, constant interest rates and non-constant sectoral expenditure shares (non-homothetic Engel curves). Our model is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing and the rise of services both in nominal and real terms. We estimate the demand system derived from the model --which takes a simple log-linear form-- using historical data on sectoral shares from 30 different countries and household survey data. We show that our model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle and developing economies in the post-war period.

Suggested Citation

  • Marti Mestieri & Danial Lashkari & Diego Comin, 2015. "Structural Transformations with Long-Run Price and Income Effects," 2015 Meeting Papers 437, Society for Economic Dynamics.
  • Handle: RePEc:red:sed015:437
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    2. Kiminori Matsuyama, 2019. "Engel's Law in the Global Economy: Demand‐Induced Patterns of Structural Change, Innovation, and Trade," Econometrica, Econometric Society, vol. 87(2), pages 497-528, March.
    3. Berthold Herrendorf & Akos Valentinyi & Richard Rogerson, 2018. "Structural Change in Investment and Consumption: A Unified Approach," 2018 Meeting Papers 88, Society for Economic Dynamics.
    4. David Rezza Baqaee & Emmanuel Farhi, 2019. "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem," Econometrica, Econometric Society, vol. 87(4), pages 1155-1203, July.
    5. 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.
    6. Jones, C.I., 2016. "The Facts of Economic Growth," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 3-69, Elsevier.
    7. Clemens C. Struck, 2017. "On the Interaction of Growth, Trade and International Macroeconomics," Working Papers 201724, School of Economics, University College Dublin.
    8. Philippe Aghion & Benjamin F. Jones & Charles I. Jones, 2018. "Artificial Intelligence and Economic Growth," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 237-282, National Bureau of Economic Research, Inc.
    9. Valentinyi, Akos & Herrendorf, Berthold & Duernecker, Georg, 2017. "Structural Change within the Service Sector and the Future of Baumol's Disease," CEPR Discussion Papers 12467, C.E.P.R. Discussion Papers.
    10. Akos Valentinyi & Georg Duernecker, 2017. "Unbalanced Growth Slowdown," 2017 Meeting Papers 822, Society for Economic Dynamics.

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