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  3. American Economic Journal: Macroeconomics
  4. July 2015
  5. Structural Change, Growth, and Volatility

Structural Change, Growth, and Volatility

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Abstract

I construct a two-sector general equilibrium model of structural change to study the impact of sectoral composition of gross domestic product (GDP) on cross-country differences in GDP growth and volatility. For an empirically relevant parametrization of sectoral production functions, an increase in the share of services in GDP reduces both aggregate total factor productivity (TFP) growth and volatility, thus reducing GDP growth and volatility. When the model is calibrated to the US manufacturing and service sector, the rise of the service sector occurring as income grows can account for a large fraction of the differences in per capita GDP growth and volatility between high-income economies and upper middle income economies. (JEL E23, E25, E32, L60, L80)

Citation

Moro, Alessio. 2015. "Structural Change, Growth, and Volatility." American Economic Journal: Macroeconomics, 7 (3): 259-94. DOI: 10.1257/mac.20130057

Additional Materials

JEL Classification

  • E23 Macroeconomics: Production
  • E25 Aggregate Factor Income Distribution
  • E32 Business Fluctuations; Cycles
  • L60 Industry Studies: Manufacturing: General
  • L80 Industry Studies: Services: General
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