Structural change accounting with labor market distortions |
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| Affiliation: | 1. Finance Center Muenster, University of Muenster, Universitätsstr. 14-16, D-48143 Münster, Germany;2. House of Finance, Goethe University Frankfurt, Theodor-W.-Adorno-Platz 3, D-60323 Frankfurt am Main, Germany;3. Oliver Wyman, Friedrich-Ebert-Anlage 49, D-60308 Frankfurt am Main, Germany;1. CEPII, 113 Rue de Grenelle, 75007 Paris, France;2. Department of Economics, Emory University, Rich Memorial Building, Atlanta, GA, United States;1. Department of Economics, Deakin University, 70 Elgar Road, Burwood VIC 3125, Australia;2. OECD Economics Department, 2, rue André Pascal, 75775 Paris Cedex 16, France;3. Department of Economics, Monash University, Clayton VIC 3800, Australia;1. Department of Mathematics, Université du Québec à Montréal, Box 8888, Montreal, Quebec, Canada H3C 3P8;2. Department of Decision Sciences, HEC Montréal, 3000 Côte-Sainte-Catherine Road, Montreal, Quebec, Canada H3T 2A7 and GERAD;3. Corporate Actuarial Department, Standard Life Canada, 1245 Sherbrooke Street West, Montreal, Quebec, Canada H3G 1G2 |
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| Abstract: | This paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the U.S., India, Mexico and Brazil between 1960 and 2005. I use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital. I incorporate these distortions into a model of structural change, and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country. Counterfactuals reveal that (1) TFP growth in agriculture drives most of the decline in its share of labor; (2) the role of labor market distortions is limited. |
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| Keywords: | Structural change Productivity Distortions |
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