The Rise of Services and Balanced Growth in Theory and Data

Miguel Leon-Ledesma and Alessio Moro

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 4, 109-46

Abstract: We investigate the effect of structural transformation on the process of economic growth. Using a two-sector growth model we show that, in addition to Baumol's cost disease, structural transformation from goods to services generates other predictions that are in line with cross-country growth facts: an increase in the real investment rate, a decline in the real interest rate and the marginal product of capital, and an acceleration of investment-specific technological change as the share of services increases. The model calibrated to US data can account for the elasticity of real investment rates to the share of services measured in cross-country data.

JEL-codes: E22 E23 E43 L16 O33 O41 O47 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: The Rise of Services and Balanced Growth in Theory and Data (2018)
Working Paper: The Rise of Services and Balanced Growth in Theory and Data (2017)
Working Paper: The rise of services and balanced growth in theory and data (2017)
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DOI: 10.1257/mac.20180373

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