-
Views
-
Cite
Cite
Francisco J. Buera, Joseph P. Kaboski, Can Traditional Theories of Structural Change Fit the Data?, Journal of the European Economic Association, Volume 7, Issue 2-3, 1 May 2009, Pages 469–477, https://doi.org/10.1162/JEEA.2009.7.2-3.469
- Share Icon Share
Abstract
Two traditional explanations for structural changes are sector-biased technological progress and non-homothetic preferences. This paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis-a-vis time series. The exercise identifies a set of puzzles for standard theories: (i) the model cannot account for the steep decline in manufacturing and rise in services in the later data; (ii) the standard model requires implausibly low elasticity of substitution across goods to match the consumption and output data; and (iii) the behavior of consumption and output shares differs significantly from that of employment shares. We argue that models that incorporate home production, sector-specific factor distortions, and differences across sectors in the accumulation of human capital are promising avenues to amend the standard models.