Discussion Paper Details

Please find the details for DP10846 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Structural Change with Long-run Income and Price Effects

Author(s): Diego Comin, Danial Lashkari and Martí Mestieri

Publication Date: September 2015

Keyword(s): implicitly additively separable preferences, nonhomothetic CES preferences and structural transformation

Programme Area(s): Macroeconomics and Growth

Abstract: We present a new multi-sector growth model that accommodates long-run demand and supply drivers of structural change. The model generates nonhomothetic Engel curves at all levels of development and is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing and the rise of services over time. The economy converges to a constant aggregate growth rate that depends on sectoral income elasticities, capital intensities and rates of technological progress. We estimate the demand system derived from the model using historical data on sectoral employment shares from twenty-five countries and household survey data from the US. Our estimated model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle and developing economies in the post-war period. We find that income effects play a major role in generating structural change.

For full details and related downloads, please visit:

Bibliographic Reference

Comin, D, Lashkari, D and Mestieri, M. 2015. 'Structural Change with Long-run Income and Price Effects'. London, Centre for Economic Policy Research.