Life During Structural Transformation

39 Pages Posted: 23 Jan 2015

See all articles by Jonathan R.W. Temple

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Huikang Ying

University of Bristol

Date Written: December 2014

Abstract

We examine whether structural transformation leads to a Kuznets curve. We present a dynamic general equilibrium model with heterogeneous workers, occupational self-selection and selective migration, and calibrate the model to survey data for Malawi. We show that structural transformation raises living standards unevenly. As development proceeds, the movement of workers from agriculture is associated with rising wage inequality, rather than a Kuznets curve. The increase in sectoral wage inequality is pronounced for agriculture. At the same time, structural transformation is associated with major reductions in rural poverty, and eventually in urban poverty.

Keywords: inequality, Kuznets curve, Roy model, structural transformation

JEL Classification: D31, O15, O41

Suggested Citation

Temple, Jonathan R.W. and Ying, Huikang, Life During Structural Transformation (December 2014). CEPR Discussion Paper No. DP10297. Available at SSRN: https://ssrn.com/abstract=2554372

Jonathan R.W. Temple (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Huikang Ying

University of Bristol

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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