DP4763 Structural Change in a Multi-Sector Model of Growth

Author(s): Liwa Rachel Ngai, Christopher Pissarides
Publication Date: November 2004
Keyword(s): multi-sector growth, sectoral employment, structural change, unbalanced growth
JEL(s): O14, O41
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4763

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.