Working Paper: CEPR ID: DP4763
Authors: Liwa Rachel Ngai; Christopher Pissarides
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 labour 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 two-digit 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.
Keywords: multisector; growth; sectoral employment; structural change; unbalanced growth
JEL Codes: O14; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sectoral TFP growth rates (O49) | shifts in employment shares (J69) |
| structural change (L16) | constant aggregate growth path (O40) |
| conditions for balanced aggregate growth (O40) | structural change outcomes (L16) |
| capital goods (E22) | sustaining growth (O44) |
| sectoral productivity growth (O49) | employment dynamics (J63) |