The geography of structural transformation: Effects on inequality and mobility

Kohei Takeda

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: The interplay between structural transformation in the aggregate and local economies is key to understanding spatial inequality and worker mobility. This paper develops a dynamic overlapping generations model of economic geography where historical exposure to different industries creates persistence in occupational structure, and non-homothetic preferences and differential productivity growth lead to different rates of structural transformation. Despite the heterogeneity across locations, sectors, and time, the model remains tractable and is calibrated with the U.S. economy from 1980 to 2010. The calibration allows us to back out measures of upward mobility and inequality, thereby providing theoretical underpinnings to the Gatsby Curve. The counterfactual analysis shows that structural transformation has substantial effects on mobility: if there were no productivity growth in the manufacturing sector, income mobility would be about 6 percent higher, and if amenities were equalized across locations, it would rise by around 10 percent. In these effects, we find that different degrees of historical exposure to industries in local economies play an important role.

Keywords: structural transformation; upward mobility; labor mobility; economic geography (search for similar items in EconPapers)
Date: 2022-12-12
New Economics Papers: this item is included in nep-dge, nep-geo, nep-his, nep-tid and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Geography of Structural Transformation: Effects on Inequality and Mobility (2023)
Working Paper: The geography of structural transformation: effects on inequality and mobility (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1893

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