American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
The Rise of Services and Balanced Growth in Theory and Data
American Economic Journal: Macroeconomics
vol. 12,
no. 4, October 2020
(pp. 109–46)
(Complimentary)
Abstract
We investigate the effect of structural transformation on the process of economic growth. Using a two-sector growth model we show that, in addition to Baumol's cost disease, structural transformation from goods to services generates other predictions that are in line with cross-country growth facts: an increase in the real investment rate, a decline in the real interest rate and the marginal product of capital, and an acceleration of investment-specific technological change as the share of services increases. The model calibrated to US data can account for the elasticity of real investment rates to the share of services measured in cross-country data.Citation
León-Ledesma, Miguel, and Alessio Moro. 2020. "The Rise of Services and Balanced Growth in Theory and Data." American Economic Journal: Macroeconomics, 12 (4): 109–46. DOI: 10.1257/mac.20180373Additional Materials
JEL Classification
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- E43 Interest Rates: Determination, Term Structure, and Effects
- L16 Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O41 One, Two, and Multisector Growth Models
- O47 Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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