Structural Change Accounting with Labor Market Distortions

Wenbiao Cai

Departmental Working Papers from The University of Winnipeg, Department of Economics

Abstract: This paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change. I use a model in which labor productivity is the product of TFP and human capital in each sector, but distortions generate wedges in wage per efficiency worker across sectors. I calculate human capital by sector using micro census data, and use the model to infer TFP and distortions such that it replicates structural change in the US, India, Mexico and Brazil between 1960 and 2005. I find that (1) TFP growth in agriculture drives most of the decline in its share of labor; (2) the role of labor market distortions is limited.

Pages: 31 pages
Date: 2014-10
New Economics Papers: this item is included in nep-gro and nep-lab
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Journal Article: Structural change accounting with labor market distortions (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:win:winwop:2014-03

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