 Productivity, relative sectoral prices, and total factor productivity: Theory and evidenceKausik Gangopadhyay and Debasis Mondal Economic Modelling, 2021, vol. 100, issue C Abstract: This study examines the role of sectoral productivity in explaining the structural change process and relative sectoral prices in an economy. A simple two-sector general equilibrium model was developed to show that improvement in agricultural productivity relocates labor away from the agriculture sector under certain conditions. In contrast to the conventional wisdom that relative sectoral prices reflect relative sectoral productivities, this study shows the possibility of a U-shaped relationship between the two factors and found a structural break in their relationship based on the US data during 1920–1965. We estimate our model parameters by using the simulated method of moments after constructing a suitable structural model with historical data on the US economy for the previous two centuries (1820–2017). For the most plausible set of parameter values, our model could primarily replicate the relative price of farm movement and the agricultural labor share of the US economic history. Keywords: Agricultural productivity; Structural transformation; Manufacturing productivity; Terms of trade; Simulated method of moments; Calibration; Nonfarm productivity; Multisector growth model; General equilibrium model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:100:y:2021:i:c:s0264999321000985 DOI: 10.1016/j.econmod.2021.105509 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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