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The Structural Transformation and Aggregate Productivity in Portugal

  • Margarida Duarte
  • Diego Restuccia

We document the substantial process of structural transformation -the reallocation of labor between agriculture, manufacturing, and services- and aggregate productivity growth undergone by Portugal between 1956 and 1995. In this paper, we assess the quantitative role of sectoral productivity in accounting for these processes. We calibrate a model of the structural transformation to data for the United States and use the model to gain insight into the factors driving the structural transformation and aggregate productivity growth in Portugal. The model implies that Portugal features low and roughly constant relative productivity in agriculture and services (around 22 percent) and a modest but growing relative productivity in manufacturing (from 44 to 110 percent). We find that productivity growth in manufacturing accounts for most of the reduction of the aggregate productivity gap with the United States and that further substantial improvements in relative aggregate productivity can only be accomplished via improvements in the relative productivity of the service sector.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-261.

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Length: 38 pages
Date of creation: 13 Nov 2006
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-261
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  1. 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.
  2. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 235-259, 04.
  3. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  4. Edward C. Prescott, 2004. "Why Do Americans Work So Much More Than Europeans?," Levine's Bibliography 122247000000000413, UCLA Department of Economics.
  5. Timothy J. Kehoe & Edward C. Prescott (), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
  6. André Silva, 2008. "Taxes and labor supply: Portugal, Europe, and the United States," Portuguese Economic Journal, Springer, vol. 7(2), pages 101-124, August.
  7. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  8. Tiago Cavalcanti, 2007. "Business cycle and level accounting: the case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 47-64, April.
  9. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
  10. Sergio Rebelo & Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 01/85, International Monetary Fund.
  11. Richard Rogerson, 2006. "Structural Transformation and the Labor Market," 2006 Meeting Papers 256, Society for Economic Dynamics.
  12. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
  13. Margarida Duarte & Diego Restuccia, 2006. "The Role of the Structural Transformation in Aggregate Productivity," 2006 Meeting Papers 415, Society for Economic Dynamics.
  14. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  15. 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 431-52, May.
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