will the true labor share stand up an applied survey on labor share measures labor s share of income is a key variable in economics it plays a leading role in analysis of in equality globalization technical change growth theories etc notwithstanding this broad application there are many different definitions of the labor share understanding and synthesizing those differences is the purpose of this applied survey empirical measures may vary reflecting the allocation of income components that cannot be directly ascribed to capital or labor we examine the alternative assumptions made in the literature in this regard and quantify and motivate the resulting discrepancies focusing mostly on us data we show that different measures can have very distinct properties in terms of the observed stochastic trends shares of short medium and long run variation and volatilities persistence and mean reversion properties and susceptibility to structural breaks for instance while short run properties of the surveyed labor share measures are relatively consistent across all definitions and countercyclical their medium and long run trends may diverge substantially and are procyclical to substantiate our analysis we document the implications of discrepancies in the empirical labor share definition for growth accounting analyzing the effect of technology shocks and for estimating inflation dynamics

structural change in an open economy we study the importance of international trade in structural change our framework has both productivity and trade cost shocks and allows for non unitary income and substitution elasticities we calibrate our model to investigate south korea s structural change between 1971 and 2005 we nd that the shock processes propagated through the model s two main transmission mechanisms non homothetic preferences and the open economy explain virtually all of the evolution of agriculture and services labor shares and the rising part of the hump shape in manufacturing counterfactual exercises show that the role of the open economy is quantitatively important for explaining south korea s structural change

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

agricultural productivity and the sectoral reallocation of labor in rural india abstract how do shocks to agricultural productivity affect the allocation of labor across sectors of the economy to answer this i use data from rural india to show that exogenous increases in agricultural productivity caused by abnormally high levels of precipitation lead to an increase in the labor share of the non agricultural sector i further show that the non tradable sector expands significantly when agricultural output increases this evidence is consistent with increasing agricultural output causing increased demand for local non tradables which in turn increases the non agricultural labor share

agricultural distortions structural change and economic growth a cross country analysis taxing agriculture to mobilize resources for industrialization has been a widely used development strategy using novel cross country time series data sets with direct measures of agricultural taxation we examine how a policy bias against agriculture affects the speed of convergence in income per capita structural change and economic growth we find that distortionary agricultural policies in poor economies can account for the emergence of convergence clubs in our sample by significantly retarding their structural transformation and economic growth overall we find no evidence suggesting that policies that discriminate against agriculture have been beneficial for long term economic growth

capital skill complementarity sectoral labor productivity and structural transformation abstract in the postwar u s economy labor productivity has been growing faster in the goods sector versus the service sector this paper argues that this sectoral labor productivity growth gap can largely be explained by the fact that capital intensity also increases faster in the goods sector i build a two sector neoclassical growth model in which capital substitutes low skilled labor but complements high skilled labor and the goods sector is more intensive in low skilled labor relative to the service sector as observed in the data as capital becomes more abundant relative to labor along economic growth low skilled labor is substituted by capital leading to faster growth of capital intensity and hence labor productivity in the goods sector using a calibrated model i find that two thirds of the sectoral labor productivity growth gap can be explained by capital accumulation and its interaction with capital skill complementarity

transportation costs agricultural productivity and cross country income differences i document large difierences in domestic transport costs and transportation infrastructure across nations the richest countries have 5 times lower transport costs and 32 times more infrastructure per capita than the poorest countries of the world are these difierences a source of aggregate labor productivity difierences across nations using a three sector two region general equilibrium model i show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non agriculture taking as given the observed difierences in transportation costs and transportation infrastructure per capita i quantify the role of transportation for cross country income difierences the calibrated model produces an income disparity of 7 5 between the 5 rich and 5 poor countries this corresponds to an improvement of 50 relative to the disparity predicted by a two sector model of agriculture and non agriculture furthermore the efiects of advancements in transportation are non linear the elasticity of aggregate labor productivity with respect to transport labor productivity in the poorest nations is 6 times higher than in the richest ones the efiects of transport frictions are even more pronounced when restrictions to regional migration are introduced

the food problem and the evolution of international income levels in most poor countries large fractions of land labor and other productive resources are devoted to producing food for subsistence needs we show that a model incorporating the food problem can provide new and useful insights into the evolution of international income levels in particular we find that the food problem can explain why some countries started to realize increases in per capita output more than 250 years later in history than others we also show that the food problem has important implications for growth miracles and the speed at which a country converges to its balanced growth path

forecast comparisons in unstable environments we propose new methods for comparing the out of sample forecasting performance of two competing models in the presence of possible instabilities the main idea is to develop a measure of the relative local forecasting performance for the two models and to investigate its stability over time by means of statistical tests we propose two tests the fluctuation test and the one time reversal test that analyze the evolution of the models relative performance over historical samples in contrast to previous approaches to forecast comparison which are based on measures of global performance we focus on the entire time path of the models relative performance which may contain useful information that is lost when looking for the model that forecasts best on average we apply our tests to the analysis of the time variation in the out of sample forecasting performance of monetary models of exchange rate determination relative to the random walk copyright 2010 john wiley sons ltd

on the heterogeneity of sectoral growth and structural dynamics evidence from austrian manufacturing industries this article studies the factors driving structural dynamics across austrian manufacturing industries using a structural vector autoregressive model svar framework we identify sectoral labour productivity and demand shocks that are orthogonal to aggregate shocks we analyse the sectoral impulse response patterns and find that the effect of industry labour productivity shocks on industry output growth is quite heterogeneous we devise a taxonomy that allows us to classify industries according to the effect productivity and demand shocks have on output growth we also show that productivity shocks are quite heterogeneous not just across industries but also over time whereas shocks to sectoral demand growth are more systematic we test the taxonomy in a panel regression and are able to confirm our sector specific findings industry demand shocks and aggregate productivity and demand shocks lead always to an increase in industry output and industry employment

which sectors make poor countries so unproductive which sectors are most responsible for the low total factor productivities of developing countries to answer this question we develop a new framework for sectoral development accounting applying this framework to the penn world table we find that in equipment construction and food the sectoral tfp differences between developing countries and the united states are much larger than in the aggregate however in manufactured consumption the sectoral tfp differences are about equal to the aggregate tfp differences and in services they are much smaller we show that our level of disaggregation allows us to reconcile the results of existing studies of sectoral productivity differences which have focused on noncomparable two sector decompositions of the aggregate data we also show that our results help shed light on existing theories of aggregate tfp differences

the role of product market regulations in the process of structural change abstract the sectoral allocation of labor differs considerably across developed economies even in the presence of similar patterns of structural change a general equilibrium model that captures the stylized facts of structural change is presented in this framework economy wide product market regulations hinder the development of dynamic sectors such as service industries this is consistent with the negative cross country relationship between product market regulations and the service employment share discussed in the paper additionally the model suggests that higher service prices and rents in regulated economies reduce labor supply providing a rationale for the negative association between product market regulations and the employment rate previously found in the literature

structural transformation marketization and household production around the world we provide evidence on household and market production in 36 countries since 1960 on average the household sector accounts for almost half of total hours worked as gdp per capita increases the employment share of household production in total hours worked initially declines and then hardly changes while the employment shares of market goods and services decrease and increase estimating the value added of household production yields similar patterns labor productivity of household production is lower than and positively correlated with that in the market these findings can be used as an input into quantitative work involving household production

spatial growth and industry age between 1970 and 2000 employment growth across u s counties exhibited very different patterns in manufacturing and services whereas manufacturing employment growth was negatively related to initial manufacturing employment across the entire distribution of counties service employment growth was positively related to initial service employment for intermediate sized counties this paper presents a theory to rationalize these facts local sectoral growth is driven by technological diffusion across space and depends on the age of the sector the theory correctly predicts the relation between county employment growth and initial county employment in manufacturing at the turn of the 20th century

the industrialization and economic development of russia through the lens of a neoclassical growth model this article studies the structural transformation of russia in 1885 1940 from an agrarian to an industrial economy through the lens of a two sector neoclassical growth model we construct a data set that covers tsarist russia during 1885 1913 and soviet union during 1928 1940 we develop a methodology that allows us to identify the types of frictions and economic mechanisms that had the largest quantitative impact on russian economic development we find that entry barriers and monopoly power in the non agricultural sector were the most important reason for tsarist russia s failure to industrialize before world war i soviet industrial transformation after 1928 was achieved primarily by reducing such frictions albeit coinciding with a significantly lower performance of productivity in both agricultural and non agricultural sectors we find no evidence that tsarist agricultural institutions were a significant barrier to labour reallocation to manufacturing or that big push mechanisms were a major driver of soviet growth

conformism and structural change using a simple multisector model of endogenous growth we show that commodity specific consumption externalities can be a source of structural change when the degrees of consumption externalities are different between goods each sector grows at a different rate however the aggregate economy exhibits balanced growth in that capital stock and expenditure grow at the same constant rate a three sector version of our model may reconcile kaldor s stylized facts with empirically plausible profiles of industrial structure transformation

structural change accounting with labor market distortions abstract this paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the u s india mexico and brazil between 1960 and 2005 i use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital i incorporate these distortions into a model of structural change and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country counterfactuals reveal that 1 tfp growth in agriculture drives most of the decline in its share of labor 2 the role of labor market distortions is limited

preference shifts and the change of consumption composition while most of the literature explaining the change in consumption composition has focused on the role of relative prices and non homothetic preferences this paper examines the importance of preference shifts i introduce dynamics in preferences and find that they play a relevant role and that their exclusion worsens model performance at least as much as the exclusion of allowing non homothetic preferences

trading down and the business cycle abstract we document two facts first during the great recession consumers traded down in the quality of the goods and services they consumed second the production of low quality goods is less labor intensive than that of high quality goods when households traded down labor demand fell increasing the recession s severity we find that the trading down phenomenon accounts for a substantial fraction of the decline in u s employment in the recent recession we show that embedding quality choice in a business cycle model improves the model s amplification and comovement properties

structural transformation and comparative advantage implications for small open economies data from the last half century show that revealed comparative advantage in agriculture manufacturing is negatively positively associated with the rate of decline in labour share in agriculture motivated by this finding the author constructs and calibrates a simple open economy model where there is learning by doing in manufacturing and industry supplied inputs to agricultural production this paper focuses on the effects of comparative advantage and learning by doing on structural transformation and calibrate the model to the us and the uk data to estimate key parameters of the model quantitative experiments show that holding constant other factors a small difference in a country s comparative advantage can account for a large variation in structural transformation for open economies which does not require nearly as much differential productivity growth as in closed economy models

physiology and development why the west is taller than the rest we hypothesise that the timing of the fertility transition is an important determinant of comparative physiological development in support we provide a model of long run growth that elucidates the links between population size average body size and income during development industrialisation is shown to be accompanied by a reduction in family size and an intensification of nutrition per child early transition countries are therefore expected to be more developed today economically and physiologically empirically the timing of the fertility transition is strongly correlated with average body size across countries

capital labor substitution structural change and the labor income share abstract recent work has documented declines in the labor income share in the united states and beyond this paper documents that this decline was more pronounced in manufacturing than in services in the u s and in a broad set of other industrialized economies and shows that a model with cross sectoral differences in productivity growth and in the degree of capital labor substitutability is consistent with these trends we calibrate the model exploiting additional information on the pace of structural change from manufacturing to services on which the model also has predictions we then conduct a decomposition to establish the relative importance of several potential drivers of changes in factor income shares and structural change that have been proposed in the literature this exercise reveals that differences in the degree of capital bias of technical change across sectors combined with differences in substitution possibilities are key determinants of the observed patterns

sustainable growth and the environmental kuznets curve abstract this paper develops an endogenous growth model with pollution and both human and physical capital human capital is produced cleanly and physical capital can be used for pollution control economic growth is sustainable in the long run it is optimal for human capital to grow more rapidly than physical capital output and consumption while pollution declines for realistic parameter values our results differ sharply from stokey s result for an ak technology that sustained economic growth is not optimal the model can generate an environmental kuznets curve a pollution tax or a voucher system can implement the pareto efficiency solution

structural change in a multisector model of growth 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

is physical investment the key to china s growth miracle i introduction unprecedented high rates of economic growth in china over the past decades have stimulated a wide interest among researchers and policymakers in establishing whether rapid physical capital accumulation is the main driving force behind such outstanding growth performance and whether it suffices to sustain china s rapid economic growth in the next decades by exploiting the different implications that the relation between investment and growth has according to the neoclassical paradigm pioneered by solow 1956 and cass 1965 and endogenous growth models of the ak type this paper will attempt to test the empirical validity of the ak model for the chinese economy the main difference between the ak model and the solow model is that the former allows for the existence of constant returns to a sufficiently broad definition of capital which in turn enables investment to have a long run impact on growth in contrast under the neoclassical paradigm diminishing returns to reproducible capital leads inevitably to only temporary growth effects along the transitional path and long run growth depends on exogenous technological progress constant returns to reproducible capital characterizing linear accumulation driven models may stem from different sources like 1 positive externalities as in the models of frankel 1962 lucas 1988 and romer 1986 2 bounding the marginal product of reproducible factors away from zero jones and manuelli 1990 or 3 the existence of constant returns to all accumulable factors characterizing the different sectors of the economy barro 1990 rebelo 1991 according to standard linear accumulation driven models steady state output growth directly depends on the total investment rate in physical capital hence the dynamics of output growth should behave similarly to the dynamics of the investment rate as noted by jones 1995a a hallmark of the endogenous growth literature implies that any large permanent change in total investment should translate into a permanent change in long run growth in the same direction jones 1995a constitutes the first attempt at testing the ak type growth models using a time series framework his sample includes 15 organization for economic co operation and development oecd countries with data spanning over the period 1950 1988 he shows that the investment share in producer durables and to a lesser extent the total investment rate presents an upward deterministic trend and is generally found nonstationary when augmented dickey fuller adf 1979 tests are applied in contrast rates of economic growth remain fairly stable jones then claims that the fact that output growth rates exhibit no large permanent movements imposes a strong and testable restriction on endogenous growth models if an endogenous growth model predicts that permanent movements in some variable x have permanent effects on growth then either a x must exhibit no large persistent movements or b some other variable or variables must also have persistent effects on growth that offset the movements of x in a way that is determined by the endogenous growth model jones 1995a 502 despite the considerable effort using this framework to try to test the empirical validity of ak type growth models for the oecd countries jones 1995a li 2002 romero avila 2006 no work has been conducted along these lines for the chinese economy this is surprising because this issue should be particularly important for a country like china which is expected to become the leading economy in the coming decades with a population more than 1 3 billion which is more than four times the population of the united states this paper tries to fill this gap in the literature by applying jones test to the chinese economy over the past five decades the chinese economy has shown spectacular growth performance with an average annual growth rate of real per capita gross domestic product gdp equal to 6

income induced expenditure switching abstract this paper shows that an income effect can drive expenditure switching between domestic and imported goods we use a unique latvian scanner level dataset covering the 2008 2009 crisis to document several empirical findings first expenditure switching accounted for one third of the fall in imports and took place within narrowly defined product groups second there was no corresponding within group change in relative prices third consumers substituted from expensive imports to cheaper domestic alternatives these findings motivate us to estimate a model of nonhomothetic consumer demand which explains two thirds of the observed expenditure switching estimated switching is driven by income not changes in relative prices jel e21 f14 f31 f32 i11 l81

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

can traditional theories of structural change fit the data 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 jel o11 o14 o41

the environmental kuznets curve and the structural change hypothesis we provide a very simple macroeconomic investigation of the role that structural changes might play in generating inverted u shaped income pollution relationships differently from previous research which mainly focuses on empirical static or general equilibrium models we develop a standard balanced growth path bgp analysis we show that along the bgp equilibrium an inverted u shaped income pollution relationship may occur as a response to structural changes but whether this is the case or not it will crucially depend upon the magnitude of a production externality parameter moreover we show that the negative relationship between income and pollution can only be a transitory phenomenon and in the long run pollution will increase as income rises generating overall an n shaped pattern

accounting for agricultural decline with economic growth in taiwan abstract in this paper we propose an empirical model to decompose the evolution of the agricultural gdp share of taiwan into three components price changes factor endowment changes and technological change the full sample period is 1967 to 1997 the data were first tested to assess whether the time series are nonstationary and cointegrated after confirming their nonstationarity and cointegrated relation ship we then employ an error correction model ecm in the empirical estimation to capture the dynamic as well as long run equilibrium relationship among those economic variables the results suggest that relative prices have a positive influence on the share of agriculture in gdp in both the long run and the short run an increase in capital per unit of labor on the other hand is associated with a smaller agricultural share this result is consistent with the rybczynski theorem technical change has been biased in favor of this sector the strong negative impact of the change in factor endowments seems to dominate any possible positive effect of relative prices and technical change this result makes a strong case for a heckscher ohlin type model as a basis of understanding the development of the taiwanese economy

can total factor productivity explain value added growth in services abstract this paper examines the factors responsible for generating the services led growth witnessed in the indian economy during 1980 2005 a sectoral growth accounting exercise shows that total factor productivity tfp growth was the fastest for services moreover this tfp increase was significant in accounting for service sector value added growth a growth model with agriculture industry and services as three principal sectors is calibrated to indian data using sectoral tfp growth rates the baseline model performs well in accounting for the evolution of value added shares and their growth rates but is unable to capture sectoral employment share trends the performance of the model with respect to value added shares improves when the post 1991 increase in service sector tfp growth following the inception of market based liberalization reforms is accounted for a modified version of the model with public capital can better track trends in sectoral employment shares

uneven growth a framework for research in development economics the textbook paradigm of economy wide development rests on the premise of balanced growth that is on the presumption that all sectors will grow in unison over time as a country gets richer this view has served us reasonably well in some circumstances but is not particularly useful for accounts of modern under development in many developing countries economic growth has been fundamentally uneven software development the outsourcing of services sectoral technological change quick compositional shifts between agriculture and other sectors the rise of particular exports special economic zones and so on this paper will discuss both the sources of uneven growth and its implications with greater emphasis on the latter the paper will argue that much of the distributional issues or the reactions to globalization that we see in modern developing societies can be viewed as reactions to a growth process that is fundamentally uneven and is indeed perceived as such

why are developing countries privatization this article tests alternative hypotheses about why developing countries are pursuing privatization a policy that gained considerable popularity in the 1980s univariate and multivariate analysis indicate that privatization was more likely to be pursued by countries with high budget deficits high foreign debt and high dependence on international agencies like the world bank and the imf in regions such as latin america and asia the trend was also more likely in countries a that seemed to have overused state enterprises in the past and b those in which the private sector had grown faster than average and was thus more ready to assume tasks once assigned to state enterprises in africa however the policy may have been imposed by external agencies on countries that were not necessarily ripe for privatization for multinational firms the international opportunities created by privatization are likely to be greater in the 1990s than in the 1980s