Relative Prices and Sectoral Productivity
Margarida Duarte and
Diego Restuccia
Working Papers from University of Toronto, Department of Economics
Abstract:
The relative price of services rises with development. A standard interpretation of this fact is that productivity differences across countries are larger in manufacturing than in services. The service sector comprises heterogeneous categories. We document the behavior of relative prices and expenditure shares across two broad classifications of services: traditional services, such as health and education, featuring a rising relative price with development, and non-traditional services, such as communication and transportation, featuring a falling relative price. We find a strong reallocation of real expenditures from traditional to non-traditional services with development. Using a standard multi-sector model extended to incorporate an input-output structure, we show that cross-country productivity differences are much larger in non-traditional services (a factor of 106.5-fold between rich and poor countries) than in manufacturing (only 24.5-fold). Moreover, the productivity difference between non-traditional services and manufacturing is reduced by half when abstracting from intermediate inputs. Development requires solving the productivity problem in non-traditional services in poor countries.
Keywords: Productivity; services; input-output structure; non-traditional services. (search for similar items in EconPapers)
JEL-codes: E0 O1 O4 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2016-02-05
New Economics Papers: this item is included in nep-eff and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
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https://www.economics.utoronto.ca/public/workingPapers/tecipa-555.pdf Main Text (application/pdf)
Related works:
Journal Article: Relative Prices and Sectoral Productivity (2020) 
Working Paper: Relative Prices and Sectoral Productivity (2019) 
Working Paper: Relative Prices and Sectoral Productivity (2017) 
Working Paper: Relative Prices and Sectoral Productivity (2017) 
Working Paper: Relative Prices and Sectoral Productivity (2015) 
Working Paper: Relative Prices and Sectoral Productivity (2015) 
Working Paper: Relative Prices and Sectoral Productivity (2012) 
Working Paper: Relative Prices and Sectoral Productivity (2011) 
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