Complementarity and Transition to Modern Economic Growth
Hyeok Jeong () and
No 06.44, IEPR Working Papers from Institute of Economic Policy Research (IEPR)
In developing countries, the gradual transition to modern growth seems puzzling given the large productivity growth gap between traditional and modern sectors. We document this transition and develop a theory that resolves this puzzle. The key forces are sector-specific complementarity between work-experience and labor, and exogenous technical progress present only in the modern sector. Using nationally representative micro data from the Socio-Economic Survey of Thailand (1976-1996), we measure the theory by estimating cross-sectional earnings functions, and assess if the model jointly captures the observed transition dynamics of earnings growth and inequality. The model successfully explains the gradual transition, stagnation then take-off of aggregate earnings, and the rise and fall of experience-earnings profiles in Thailand.
Keywords: Sector-Specific Complementarity; Modern Economic Growth; TFP and Inequality (search for similar items in EconPapers)
JEL-codes: O11 O47 J31 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-dev, nep-sea and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:scp:wpaper:06-44
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