EconPapers    
Economics at your fingertips  
 

Distortions, structural transformation and the Europe-US income gap

El-hadj Bah

The B.E. Journal of Macroeconomics, 2013, vol. 13, issue 1, 681-714

Abstract: This paper uses a model of structural transformation with sectoral distortions to study the convergence of income between Western Europe and the United States (US). It shows that in addition to income effects and growth differentials in sectoral total factor productivities (TFP), sectoral distortions are important for understanding the reallocation of resources across sectors. Allowing for a growing wedge between the marginal revenue product of labor relative to capital can explain the rapid decline in the manufacturing share of hours for the US that started in the 1980s. The distortions are also important for explaining the paths of sectoral hours for many European countries. However, the distortions lead to a misallocation of resources across sectors, which helps explain why the rapid Europe-US income convergence that started in the 1950s stopped in the early 1980s.

Keywords: European catch-up, policy distortions, sectoral productivity, structural transformation, JEL Classification: E2; O1; O4 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejm-2012-0147 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:13:y:2013:i:1:p:34:n:17

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html

DOI: 10.1515/bejm-2012-0147

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2025-03-19
Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:34:n:17