Beyond Traditional Theories of Structural Change

Martí Mestieri, Joseph Kaboski and Francisco Buera

No 1555, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a generalized model of structural change that jointly considers the demand and production sides. Production is generalized to allow for factoraugmenting technical change and time-varying factor shares. Demand is generalized following the preferences in Comin, Lashkiari, and Mestieri (2015). We fit this model to data on sectoral value-added and labor allocations, price indexes, and income per capita in a large panel of 39 countries. We use the model as a diagnostic tool to examine the sources of unaccountd for development patterns by performing a wedge analysis and document systematic patterns in deviations from this model over development and time. We find falling deviations in agricultural productivity and rising deviations in service productivity relative to manufacturing over time, but the opposite pattern with income per capita. We then analyze potential sources of these measured wedges for various subsets of countries with available data. Candidates include systematic patterns in factor shares, measured human capitals, net export patterns, and unmeasured price, labor, and technology distortions that vary across sectors, development, and time.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1555

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