Sectoral Technology and Structural Transformation

Berthold Herrendorf, Christopher Herrington and Akos Valentinyi ()
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Akos Valentinyi: Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences Cardiff Business School

No 1232, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: This paper assesses the importance for structural transformation of three features of sectoral technology: labor-augmenting technological progress, capital intensity, and substitutability between capital and labor. We estimate CES production functions for agriculture, manufacturing, and services on postwar US data and compare them with Cobb-Douglas production functions with different and with equal capital shares. We find that sectoral differences in labor-augmenting technological progress are the main force behind the trends in observed relative prices and sectoral labor. As a result, sectoral Cobb-Douglas production functions with equal capital shares (which by construction abstract from differences in the elasticity of substitution and in capital shares) do a good job of capturing the postwar US structural transformation.

Keywords: CES production function; Cobb-Douglas production function; structural transformation; elasticity of substitution (search for similar items in EconPapers)
JEL-codes: O11 O14 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-11
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Related works:
Journal Article: Sectoral Technology and Structural Transformation (2015)
Working Paper: Sectoral Technology and Structural Transformation (2013)
Working Paper: Sectoral Technology and Structural Transformation (2013)
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