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Structural change and the income of nations

Cynthia Armas () and Fernando Sánchez-Losada ()
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Cynthia Armas: Universitat de Barcelona
Fernando Sánchez-Losada: Universitat de Barcelona

No 2021/412, UB Economics Working Papers from Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics

Abstract: An increase in the supply of skilled labor has been common across the world. However, despite the rise in skilled labor force, not all countries have achieved high income levels, even when their structural transformation follows the same path (from agriculture to industry and, then, from industry to services). Skilled workers might end up in either high or low TFP sectors, according to two opposite theories of structural change (skill-biased structural transformation and stagnant structural transformation). We show that directed technical change is needed to achieve skill-biased structural transformation and, therefore, skilled workers are allocated to high TFP sectors. We present macrodata and microdata evidence to identify the existence of directed technical change. We reveal that in the U.S., South Korea and France, skilled workers have ended up in high TFP sectors due to the existence of directed technical change in the process of structural transformation, but not in Canada. There is a lack of clear evidence for Italy and Spain.

Keywords: Structural change; directed technical change; unskilled and skilled sectors. (search for similar items in EconPapers)
JEL-codes: J24 O14 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-lma and nep-tid
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