Working Paper: CEPR ID: DP14964
Authors: Kjetil Storesletten; Bo Zhao; Fabrizio Zilibotti
Abstract: We document that business cycles change during the process of development. In countries with large declining agricultural sectors, aggregate employment is uncorrelated with GDP. During booms, agricultural employment declines even though agricultural labor productivity increases relative to other sectors. We construct a unified theory of business cycles and structural change consistent with the stylized facts. The theory focuses on the simultaneous decline and modernization of agriculture. As capital accumulates, agriculture becomes increasingly capital intensive as traditional agriculture is crowded out. We estimate the model and show that it accounts well for both structural transformation and business cycle fluctuations in China.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital accumulation (E22) | agricultural productivity (Q11) |
| agricultural productivity (Q11) | traditional agriculture (Q19) |
| structural change (L16) | productivity dynamics (O49) |
| economic growth (O49) | employment in agriculture (J43) |
| positive shocks in non-agriculture (F69) | structural transformation (L16) |
| capital accumulation (E22) | crowding out of traditional agriculture (P32) |
| structural change (L16) | economic growth (O49) |
| labor reallocation in response to shocks (J69) | overall economic growth (O49) |