Determinants of Structural Change

Tomasz Swiecki

Review of Economic Dynamics, 2017, vol. 24, 95-131

Abstract: In this paper I ask which of the multiple mechanisms suggested in the literature are quantitatively important for understanding the process of structural change. I build a model combining four forces in a common framework: (i) sector-biased technological progress, (ii) nonhomothetic tastes, (iii) international trade and (iv) changing wedges between factor costs across sectors. I calibrate the model using the data for 45 diverse countries over the period 1970-2005 and use counterfactual simulations of the model to systematically assess the relative importance of the four determinants of structural change. I find that sector-biased technological change is overall the most important mechanism and it is essential for understanding the decline of manufacturing labor share and the corresponding growth in services in developed countries. Nonhomothetic preferences are key to accounting for movement of labor out of agriculture, which matters primarily for poorer countries. International trade and changes in relative factor costs across sectors are important for individual countries but their impact on the relocation of labor is less systematic. I also show that a model with homothetic preferences would overstate the importance of agriculture in accounting for differences in aggregate productivity across countries and over time. (Copyright: Elsevier)

Keywords: Structural change; Structural transformation; Nonhomothetic preferences; Sectoral productivity (search for similar items in EconPapers)
JEL-codes: O11 O47 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2017.01.007
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Determinants of Structural Change" (2017)
Working Paper: Determinants of Structural Change (2014)
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:red:issued:14-247

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2017.01.007

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().