Engel's Law in the Global Economy: Demand‐Induced Patterns of Structural Change, Innovation, and Trade

Kiminori Matsuyama

Econometrica, 2019, vol. 87, issue 2, 497-528

Abstract: Endogenous demand composition across sectors due to income elasticity differences, or Engel's Law for brevity, affects (i) sectoral compositions in employment and in value‐added, (ii) variations in innovation rates and in productivity change across sectors, (iii) intersectoral patterns of trade across countries, and (iv) product cycles from rich to poor countries. Using a two‐country model of directed technical change with a continuum of sectors under nonhomothetic preferences, which is rich enough to capture all these effects as well as their interactions, this paper offers a unifying perspective on how economic growth and globalization affect the patterns of structural change, innovation, and trade across countries and across sectors in the presence of Engel's Law. Among the main messages is that globalization amplifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://doi.org/10.3982/ECTA13765

Related works:
Working Paper: Engel's Law in the Global Economy: Demand-induced Patterns of Structural Change, Innovation, and Trade (2017)
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:wly:emetrp:v:87:y:2019:i:2:p:497-528

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 W. Imbens

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