DP13469 A theory of structural change that can fit the data
|Author(s):||Simon Alder, Timo Boppart, Andreas Müller|
|Publication Date:||January 2019|
|Keyword(s):||aggregation, Multi-sector growth model, non-homothetic preferences, Non-monotonic Engel curves, Relative price effects, structural change|
|JEL(s):||E21, L16, O11, O14|
|Programme Areas:||Macroeconomics and Growth|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13469|
We study structural change in historical consumption expenditure of the United States, the United Kingdom, Canada and Australia over more than a century. To identify preference parameters from aggregate data, we characterize the most general class of preferences in a time-additive setting that admits aggregation of the intertemporal saving decision. We parametrize and estimate such intertemporally aggregable (IA) preferences and discuss their properties in a dynamic general equilibrium framework with sustained growth. Our preferences class is considerably more flexible than the Gorman form or PIGL/PIGLOG, giving rise to a good fit of the non-monotonic pattern of structural change.