Structural Change in Investment and Consumption: A Unified Approach

Berthold Herrendorf, Richard Rogerson and Akos Valentinyi ()

No 24568, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Existing models of structural change typically assume that all of investment is produced in manufacturing. This assumption is strongly counterfactual: in the postwar US, the share of services value added in investment expenditure has been steadily growing and it now exceeds 0.5. We build a new model, which takes a unified approach to structural change in investment and consumption. Our unified approach leads to three new insights: technological change is endogenously investment specific; having constant TFP growth in all sectors is inconsistent with structural change and aggregate balanced growth occurring jointly; the sector with the slowest TFP growth absorbs all resources asymptotically. We also provide empirical support from the postwar US for the first and third insight.

JEL-codes: O11 O14 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-dge, nep-hme and nep-tid
Note: EFG
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Citations: View citations in EconPapers (3)

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Working Paper: Structural Change in Investment and Consumption: A Unified Approach (2018)
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