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The Rise of Services and Balanced Growth in Theory and Data

Leon-Ledesma, Miguel A., Moro, Alessio (2019) The Rise of Services and Balanced Growth in Theory and Data. American Economic Journal: Macroeconomics, 12 (4). pp. 109-146. ISSN 1945-7707. (doi:10.1257/mac.20180373) (KAR id:77113)

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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 U.S. data can account for the elasticity of real investment rates to the share of services measured in cross-country data.

Item Type: Article
DOI/Identification number: 10.1257/mac.20180373
Uncontrolled keywords: Structural transformation, NIPA measurement, two-sector model
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Miguel Leon-Ledesma
Date Deposited: 08 Oct 2019 08:59 UTC
Last Modified: 03 Mar 2021 16:49 UTC
Resource URI: (The current URI for this page, for reference purposes)
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