Working Paper: CEPR ID: DP9370
Authors: Berthold Herrendorf; Richard Rogerson; Akos Valentinyi
Abstract: Structural transformation refers to the reallocation of economic activity across the broad sectors agriculture, manufacturing and services. This review article synthesizes and evaluates recent advances in the research on structural transformation. We begin by presenting the stylized facts of structural transformation across time and space. We then develop a multi--sector extension of the one--sector growth model that encompasses the main existing theories of structural transformation. We argue that this multi--sector model serves as a natural benchmark to study structural transformation and that it is able to account for many salient features of structural transformation. We also argue that this multi--sector model delivers new and sharper insights for understanding economic development, regional income convergence, aggregate productivity trends, hours worked, business cycles, and wage inequality. We conclude by suggesting several directions for future research on structural transformation.
Keywords: Approximate Balanced Growth; Multisector Growth Model; Structural Transformation; Stylized Facts
JEL Codes: O11; O14; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GDP per capita (O49) | agricultural employment shares (J43) |
| GDP per capita (O49) | manufacturing shares (L60) |
| GDP per capita (O49) | services shares (L84) |
| structural transformation (L16) | economic growth (O49) |
| multisector model (O41) | productivity trends (O49) |
| multisector model (O41) | wage inequality (J31) |