Investment Demand and Structural Change

Manuel Garcia-Santana, Josep Pijoan-Mas and Lucciano Villacorta ()
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Lucciano Villacorta: Banco Central de Chile, https://www.bcentral.cl/

Working Papers from CEMFI

Abstract: The sectoral composition of growing economies is largely affected by the evolution of the investment rate outside the balanced growth path. We present three novel facts consistent with this idea: (a) the value added share of manufacturing within investment goods is larger than within consumption goods, (b) the standard hump-shaped profile of manufacturing with development is much more apparent for the whole economy than for the investment and consumption goods separately, and (c) the investment rate displays a hump with development similar to the one of the value added share of manufacturing. Using a standard multi-sector growth model estimated with a large panel of countries, we find that this mechanism is especially important for the industrialization of several countries since the 1950's and for the deindustrialization of many Western economies since the 1970's. In addition, it explains a substantial part of the standard hump-shaped relationship between manufacturing and development, which has been a challenge for theories of structural transformation under balanced growth. Finally, the different composition of investment and consumption goods can also explain up to half of the decline in the relative price of investment since 1980.

Keywords: Structural change; transitional dynamics; neo-classical growth model. (search for similar items in EconPapers)
JEL-codes: E21 E23 O41 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Investment Demand and Structural Change (2021)
Working Paper: Investment Demand and Structural Change (2019)
Working Paper: Investment demand and structural change (2019)
Working Paper: Investment Demand and Structural Change (2016)
Working Paper: Investment Demand and Structural Change (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2016_1605

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