Discussion Paper Details

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Title: Structural Change in a Multi-Sector Model of Growth

Author(s): Liwa Rachel Ngai and Christopher Pissarides

Publication Date: November 2004

Keyword(s): multi-sector growth, sectoral employment, structural change and unbalanced growth

Programme Area(s): International Macroeconomics

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 labour 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.

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Bibliographic Reference

Ngai, L and Pissarides, C. 2004. 'Structural Change in a Multi-Sector Model of Growth'. London, Centre for Economic Policy Research.