Intersectoral Labor Mobility and the Growth of the Service Sector

Donghoon Lee and Kenneth I. Wolpin

Econometrica, 2006, vol. 74, issue 1, 1-46

Abstract: One of the most striking changes in the U.S. economy over the past 50 years has been the growth in the service sector. Between 1950 and 2000, service-sector employment grew from 57 to 75 percent of total employment. However, over this time, the real hourly wage in the service sector grew only slightly faster than in the goods sector. In this paper, we assess whether or not the essential constancy of the relative wage implies that individuals face small costs of switching sectors, and we quantify the relative importance of labor supply and demand factors in the growth of the service sector. We specify and estimate a two-sector labor market equilibrium model that allows us to address these empirical issues in a unified framework. Our estimates imply that there are large mobility costs: output in both sectors would have been double their current levels if these mobility costs had been zero. In addition, we find that demand-side factors, that is, technological change and movements in product and capital prices, were responsible for the growth of the service sector. Copyright The Econometric Society 2006.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (257)

Downloads: (external link)
http://hdl.handle.net/10.1111/j.1468-0262.2006.00648.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Intersectoral Labor Mobility and the Growth of the Service Sector (2004)
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:ecm:emetrp:v:74:y:2006:i:1:p:1-46

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().