Structural Change With Long‐Run Income and Price Effects

By Diego A. Comin, Danial Lashkari, M. Mestieri. Econometrica, 2015

288 citations recorded by the source corpus.

We present a new multi‐sector growth model that features nonhomothetic, constant elasticity of substitution preferences, and accommodates long‐run demand and supply drivers of structural change for an arbitrary number of sectors. The model is consistent with the decline in agriculture, the hump‐shaped evolution of manufacturing, and the rise of services over time. We estimate the demand system derived from the model using household‐level data from the United States and India, as well as historical aggregate‐level panel data for 39 countries during the postwar period. The estimated model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle, and developing economies. Our estimates support the presence of strong nonhomotheticity across time, income levels, and countries. We find that income effects account for the bulk of the within‐country evolution of sectoral reallocation.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a238db6d186e6ab72a8107287ca19c4fc27424c1

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Citations in the corpus

Engel's Law in the Global Economy: Demand‐Induced Patterns of Structural Change, Innovation, and Trade (2019, unknown): “11 Comin, Lashkari, and Mestieri (2015) review the empirical evidence that income elasticity differences across sectors are stable over a wide range of per capita income levels.”
Skill-Biased Structural Change (2021, background): “Boppart (2014), Swiecki (2014) and Comin et al. (2015) all consider more general preferences with the common feature being that income effects associated with nonhomotheticities do not vanish asymptotically.”