An empirical investigation of the relationship between trade and structural change
Mariarosaria Comunale and
Giulia Felice ()
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Giulia Felice: Politecnico di Milano
No 62, Bank of Lithuania Working Paper Series from Bank of Lithuania
This paper investigates the role of international trade in the increase in the employment share of non-tradable sectors (services and construction). Borrowing insights from the vast theoretical literature on the determinants of structural change, we build an empirical model allowing to distinguish between long-run and short-run effects. We use this model to investigate the relative importance of the main traditional demand-side and supply-side channels of structural change, assessing, in this context, the role of trade variables. To this end, we use an unbalanced panel of countries for the period 1960-2011 from the EU-KLEMS and the GGDC 10-sector databases. Our preliminary results suggest that both Engelian income effects, i.e. the so-called demand-side drivers, and relative productivity, i.e. the supply-side channel, are relevant drivers of structural change. We show that the import and export shares are positively and negatively related, respectively, with the employment shifts to non-tradable sectors in the long run, in particular, for mature and transition economies. In the short run, a positive and significant relationship between the import share and structural shifts towards tradable sectors emerges.
Keywords: Structural change; International trade; ECM (search for similar items in EconPapers)
JEL-codes: F1 F4 O1 O4 (search for similar items in EconPapers)
Pages: 42 pages
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Persistent link: https://EconPapers.repec.org/RePEc:lie:wpaper:62
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