Complementarity and transition to modern economic growth

Hyeok Jeong and Kim Yong
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Kim Yong: School of Ecomnomics, Yonsei University, 262 Seongsan-no, Seodaemun-gu, Seoul 129-749, Korea

The B.E. Journal of Macroeconomics, 2015, vol. 15, issue 1, 365-412

Abstract: The Thai Socio-Economic Survey suggests that new labor market entrants increasingly enter activities with high and positive productivity growth (modern sector), but continue to enter activities with low productivity growth (traditional sector). Workers appear to stick to their initial choice of entry between these two sectors throughout their work careers. We postulate that the transition from the traditional to modern sector is gradual because sector-specific work experience complements labor. We measure the technology parameters of each sector and the partition of the economy consistent with the identifying assumption of each sector (i.e., difference in productivity growth), by implementing a structural estimation on individual earnings equations. We verify the dual partition and sector-specific complementarity do indeed exist. We then build and simulate a model of sectoral choice which explains well the observed transition dynamics of workers across sectors at the estimated parameters, using the Thai micro data.

Keywords: experience-labor complementarity; growth and inequality dynamics; modernization of Thailand; structural transformation; transition dynamics (search for similar items in EconPapers)
JEL-codes: J31 O11 O47 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Working Paper: Complementarity and Transition to Modern Economic Growth (2006)
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DOI: 10.1515/bejm-2013-0171

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