Structural Transformation, the Mismeasurement of Productivity Growth, and the Cost Disease of Services
- (pp. 3635-67)
Abstract
If workers self-select into industries based upon their relative productivity in different tasks, and comparative advantage is aligned with absolute advantage, then the average efficacy of a sector's workforce will be negatively correlated with its employment share. This might explain the difference in the reported productivity growth of contracting goods and expanding services. Instrumenting with defense expenditures, I find the elasticity of worker efficacy with respect to employment shares is substantially negative, albeit imprecisely estimated. The estimates suggest that the view that goods and services have similar productivity growth rates is a plausible alternative characterization of growth in developed economies.Citation
Young, Alwyn. 2014. "Structural Transformation, the Mismeasurement of Productivity Growth, and the Cost Disease of Services." American Economic Review, 104 (11): 3635-67. DOI: 10.1257/aer.104.11.3635Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- H56 National Security and War
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- O41 One, Two, and Multisector Growth Models
- O47 Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence