Scale and the Origins of Structural Change

46 Pages Posted: 3 Aug 2008

See all articles by Francisco J. Buera

Francisco J. Buera

Washington University in St. Louis; National Bureau of Economic Research (NBER)

Joseph P. Kaboski

Ohio State University (OSU) - Economics; National Bureau of Economic Research (NBER); University of Notre Dame - Department of Economics

Date Written: August 1, 2008

Abstract

Structural change involves a broad set of trends: (i) sectoral reallocations, (ii) rich movements of productive activities between home and market, and (iii) an increase in the scale of productive units. After extending these facts, we develop a model to explain them within a unified framework. The crucial distinction between manufacturing, services, and home production is the scale of the productive unit. Scale technologies give rise to industrialization and the marketization of previously home produced activities. The rise of mass consumption leads to an expansion of manufacturing, but a reversal of the marketization process for service industries. Finally, the later growth in the scale of services leads to a decline in industry and a rise in services.

Keywords: structural change, efficient scale, home production

JEL Classification: 014, 030, 040

Suggested Citation

Buera, Francisco J. and Kaboski, Joseph P., Scale and the Origins of Structural Change (August 1, 2008). FRB of Chicago Working Paper No. 2008-06. Available at SSRN: https://ssrn.com/abstract=1195742 or http://dx.doi.org/10.2139/ssrn.1195742

Francisco J. Buera

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph P. Kaboski (Contact Author)

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

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