Structural Change in a Multisector Model of Growth

Abstract

We study a multi-sector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation, and constant aggregate growth path. The conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists. We present evidence from US twodigit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services. We show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model. JEL Classification: O41, O14

Kuznets-Kaldor-Puzzle, Neutral Structural Change and Independent Preferences and Technologies

“…change shown, e.g., by Baumol (1967); theoretical relevance for structural change shown by, e.g., Ngai and Pissarides (2007).…”

“…(Of course, the existence of neutral structural change requires some knifeedge conditions, which will be analyzed below, in our model.) Previously, Ngai and Pissarides (2007) have shown that neutral structural change can arise when all sectors have the same capital-intensity. However, Acemoglu and Guerrieri (2008) have shown that their results do not hold if capital-intensities differ across sectors, i.e.…”

“…As discussed in detail by Stijepic (2011), we learn from this literature that 1 Papers that provide empirical evidence for the massive labor reallocation across sectors during the growth process are e.g. Kuznets (1976), Maddison (1980), Kongsamut et al (1997Kongsamut et al ( , 2001) and Ngai and Pissarides (2004). Kongsamut et al (1997Kongsamut et al ( , 2001) formulate the following stylized facts of structural change for the last hundred years: 1.)…”

“…includes Kongsamut et al (1997Kongsamut et al ( , 2001), Meckl (2002), Foellmi and Zweimueller (2008), Ngai and Pissarides (2007), Acemoglu and Guerrieri (2008) and Boppart (2010). As discussed in detail by Stijepic (2011), we learn from this literature that 1 Papers that provide empirical evidence for the massive labor reallocation across sectors during the growth process are e.g.…”

“…the employment share of manufacturing is constant. Ngai and Pissarides (2007) note that the development of the manufacturing employment-share can be regarded as "hump-shaped" in the longer run. 2 In detail, Kaldor's stylized facts state that the growth rate of output per capita, the real rate of return on capital, the capital-to-output ratio and the income distribution (between labour and capital) are nearly constant in the long run; capital-to-labour ratio increases in the long run.…”