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Structural Change, Growth, and Volatility

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  • Alessio Moro

Abstract

I construct a two-sector general equilibrium model of structural change to study the impact of sectoral composition of gross domestic product (GDP) on cross-country differences in GDP growth and volatility. For an empirically relevant parametrization of sectoral production functions, an increase in the share of services in GDP reduces both aggregate total factor productivity (TFP) growth and volatility, thus reducing GDP growth and volatility. When the model is calibrated to the US manufacturing and service sector, the rise of the service sector occurring as income grows can account for a large fraction of the differences in per capita GDP growth and volatility between high-income economies and upper middle income economies. (JEL E23, E25, E32, L60, L80)

Suggested Citation

  • Alessio Moro, 2015. "Structural Change, Growth, and Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 259-294, July.
    • Handle: RePEc:aea:aejmac:v:7:y:2015:i:3:p:259-94
    Note: DOI: 10.1257/mac.20130057
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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