Accounting for Structural Change Over Time: A Case Study of Three Middle-Income Countries

Michael Sposi, Jing Zhang and Kei-Mu Yi
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Jing Zhang: Federal Reserve Bank of Chicago

No 1141, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We review the main mechanisms of structural change: non-homothetic preferences, asymmetric productivity growth couple with non-unitary elasticities of substitution and comparative advantage and international trade, as well as several additional mechanisms. We then present some key established and recent facts of structural change. To understand these facts better, we develop a dynamic, multi-sector, multi-country model of structural change that embodies the mechanisms we review. We calibrate the model, and back out the "wedges" that account for the evolution of the model's endogenous variables. Then, focusing on the evolution of the industry employment share in Hungary, Portugal, and South Korea post-1990, we conduct several structural accounting decompositions. Our decompositions suggests that several of the mechanisms play important roles in the evolution of the industry employment share and of openness in these countries.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:1141

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