Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77505
Authors: 
Boppart, Timo
Year of Publication: 
2011
Series/Report no.: 
Working Paper Series, Department of Economics, University of Zurich 2
Abstract: 
Growth of per-capita income is associated with (i) significant shifts in the sectoral economic structure, (ii) systematic changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic expenditure structure difference between rich and poor households. Ngai and Pissarides (2006) and Acemoglu and Guerrieri (2008) are consistent with observation (i)-(iii) but abstract form non-homotheticities of preferences. However, they cannot replicate the structural change between the U.S. goods and service sector quantitatively. This paper presents a growth model, which reconciles both forces of structural change - relative price and income effects - with balanced growth on the aggregate. The theory is simple and parsimonious and contains an analytical solution. The model can replicate shape and magnitude of the nonbalanced sectoral facts as well as the balanced nature of growth on the aggregate. In a structural estimation, the model's functional form is exploited to obtain estimates for the relative importance of income and price effects as determinants of the structural change.
Subjects: 
structural change
relative price effect
non-Gorman preferences
Kaldor facts
JEL: 
O14
O30
O41
D90
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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