Working Paper: CEPR ID: DP5655
Authors: Jonathan Temple; Ludger Woessmann
Abstract: This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Structural change matters because, if the marginal product of labour varies across sectors, changes in the structure of employment can raise aggregate productivity. The models in the paper incorporate this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and indicate that the reallocation of labour makes a significant contribution to the international variation in productivity growth.
Keywords: dualism; structural change; TFP growth; wage differentials
JEL Codes: O11; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor reallocation from agriculture to non-agriculture sectors (J89) | Total output increases (E23) |
| Structural change (L16) | Growth (O00) |
| Structural change terms (L16) | Explanatory power of growth regressions (O40) |
| Labor reallocation contributes to international variations in productivity growth (F16) | Structural change leads to larger inter-sectoral wage differentials (J39) |
| Marginal product differentials (J31) | Productivity gains (O49) |
| Structural change (L16) | Larger inter-sectoral wage differentials (J39) |