NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Danial Lashkari

Littauer Center
Economics Department
Harvard University
Cambridge, MA 02138

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NBER Working Papers and Publications

September 2015Structural Change with Long-run Income and Price Effects
with Diego A. Comin, Martí Mestieri: w21595
We present a new multi-sector growth model that accommodates long-run demand and supply drivers of structural change. The model generates nonhomothetic Engel curves at all levels of development and is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing and the rise of services over time. The economy converges to a constant aggregate growth rate that depends on sectoral income elasticities, capital intensities and rates of technological progress. We estimate the demand system derived from the model using historical data on sectoral employment shares from twenty-five countries and household survey data from the US. Our estimated model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle and developing economies...
 
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