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Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences


Boppart, Timo (2011). Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences. Working paper series / Department of Economics No. 02, University of Zurich.

Abstract

Growth of per-capita income is associated with (i) significant shifts in the sectoral economic structure, (ii) systematic changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic expenditure structure difference between rich and poor households. Ngai and Pissarides (2006) and Acemoglu and Guerrieri (2008) are consistent with observation (i)-(iii) but abstract form non-homotheticities of preferences. However, they cannot replicate the structural change between the U.S. goods and service sector quantitatively. This paper presents a growth model, which reconciles both forces of structural change - relative price and income effects - with balanced growth on the aggregate. The theory is simple and parsimonious and contains an analytical solution. The model can replicate shape and magnitude of the nonbalanced sectoral facts as well as the balanced nature of growth on the aggregate. In a structural estimation, the model’s functional form is exploited to obtain estimates for the relative importance of income and price effects as determinants of the structural change.

Growth of per-capita income is associated with (i) significant shifts in the sectoral economic structure, (ii) systematic changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic expenditure structure difference between rich and poor households. Ngai and Pissarides (2006) and Acemoglu and Guerrieri (2008) are consistent with observation (i)-(iii) but abstract form non-homotheticities of preferences. However, they cannot replicate the structural change between the U.S. goods and service sector quantitatively. This paper presents a growth model, which reconciles both forces of structural change - relative price and income effects - with balanced growth on the aggregate. The theory is simple and parsimonious and contains an analytical solution. The model can replicate shape and magnitude of the nonbalanced sectoral facts as well as the balanced nature of growth on the aggregate. In a structural estimation, the model’s functional form is exploited to obtain estimates for the relative importance of income and price effects as determinants of the structural change.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:O14, O30, O41, D90
Uncontrolled Keywords:Structural change, relative price effect, non-Gorman preferences, Kaldor facts
Language:English
Date:January 2011
Deposited On:11 Nov 2011 07:30
Last Modified:05 Apr 2016 15:05
Series Name:Working paper series / Department of Economics
Number of Pages:47
ISSN:1664-7041 (P) 1664-705X (E)
Official URL:http://www.econ.uzh.ch/static/wp/econwp002.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php
Permanent URL: http://doi.org/10.5167/uzh-50769

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