NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Two Perspectives on Preferences and Structural Transformation

Berthold Herrendorf, Richard Rogerson, Ákos Valentinyi

NBER Working Paper No. 15416
Issued in October 2009
NBER Program(s):   EFG

We ask what specification of preferences can account for the changes in the expenditure shares of broad sectors that are associated with the process of structural transformation in the U.S. since 1947. Following the tradition of the expenditure systems literature, we first calibrate utility function parameters using NIPA data on final consumption expenditure. We find that a Stone-Geary specification fits the data well. While useful, this exercise does not tell the researcher what utility function to use in a model that posits sectoral production functions in value added form. We therefore develop a method to calculate the value added components of consumption categories that are consistent with value added production functions, and use these data to calibrate a utility function over sectoral consumption value added. We find that a Leontief specification fits the data well. Interestingly, the two specifications display very different properties: for final consumption expenditure income effects are the dominant force behind changes in expenditure shares whereas for consumption value added relative price effects are dominant.

download in pdf format
   (301 K)

email paper

This paper is available as PDF (301 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-89, December.

Users who downloaded this paper also downloaded these:
Herrendorf, Rogerson, and Valentinyi w18996 Growth and Structural Transformation
Rogerson w12889 Structural Transformation and the Deterioration of European Labor Market Outcomes
Buera and Kaboski w14822 The Rise of the Service Economy
Feldstein w0947 Domestic Saving and International Capital Movements in the Long Run and the Short Run
Kongsamut, Rebelo, and Xie w6159 Beyond Balanced Growth
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us