Investment Demand and Structural Change

Josep Pijoan-Mas, García-Santana, Manuel and Lucciano Villacorta
Authors registered in the RePEc Author Service: Manuel Garcia-Santana

No 11636, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the joint evolution of the sectoral composition and the investment rate of developing economies. Using panel data for several countries in different stages of development, we document three novel facts: (a) the share of industry and the investment rate are strongly correlated and follow a hump-shaped profile with development, (b) investment goods contain more domestic value added from industry and less from services than consumption goods do, and (c) the evolution of the sectoral composition of investment and consumption goods differs from the one of GDP. We build and estimate a multi-sector growth model to fit these patterns and provide two important results. First, the hump-shaped evolution of investment demand explains half of the hump in industry with development. Second, asymmetric sectoral productivity growth helps explain the decline in the relative price of investment goods along the development path, which in turn increases capital accumulation and promotes growth.

Keywords: Transitional dynamics; Neo-classical growth model; Structural change (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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