Structural Change and the Kaldor Facts in a Growth Model With Relative Price Effects and Non‐Gorman Preferences

Timo Boppart

Econometrica, 2014, vol. 82, 2167-2196

Abstract: U.S. data reveal three facts: (1) the share of goods in total expenditure declines at a constant rate over time, (2) the price of goods relative to services declines at a constant rate over time, and (3) poor households spend a larger fraction of their budget on goods than do rich households. I provide a macroeconomic model with non‐Gorman preferences that rationalizes these facts, along with the aggregate Kaldor facts. The model is parsimonious and admits an analytical solution. Its functional form allows a decomposition of U.S. structural change into an income and substitution effect. Estimates from micro data show each of these effects to be of roughly equal importance.

Date: 2014
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Working Paper: Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences (2013)
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