Structural Change in a Multi-Sector Model of Growth

45 Pages Posted: 15 Feb 2005

See all articles by Rachel Ngai

Rachel Ngai

London School of Economics & Political Science (LSE) - Department of Economics; Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Christopher A. Pissarides

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Hong Kong University of Science & Technology (HKUST)

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Date Written: November 2004

Abstract

We study a multi-sector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation, and constant aggregate growth path. The conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists. We present evidence from US two-digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services. We show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model.

Keywords: Structural change, unbalanced growth, multi-sector growth, sectoral employment

JEL Classification: O14, O41

Suggested Citation

Ngai, Liwa Rachel and Pissarides, Christopher, Structural Change in a Multi-Sector Model of Growth (November 2004). CEPR Discussion Paper No. 4763. Available at SSRN: https://ssrn.com/abstract=664604

Liwa Rachel Ngai (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

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Christopher Pissarides

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
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+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Bonn, D-53072
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Hong Kong University of Science & Technology (HKUST) ( email )

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Hong Kong

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