Structural Change and Cross-Country Growth Empirics
One of the most striking features of economic growth is the process of structural change whereby the share of agriculture in GDP decreases as countries develop. The cross-country growth literature typically estimates an aggregate homogeneous produc...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/01/17196537/structural-change-cross-country-growth-empirics http://hdl.handle.net/10986/12157 |
| Summary: | One of the most striking features of
economic growth is the process of structural change whereby
the share of agriculture in GDP decreases as countries
develop. The cross-country growth literature typically
estimates an aggregate homogeneous production function or
convergence regression model that abstracts from this
process of structural change. This paper investigates the
extent to which assumptions about aggregation and
homogeneity matter for inferences regarding the nature of
technology differences across countries. Using a unique
World Bank dataset, it estimates production functions for
agriculture and manufacturing in a panel of 40 developing
and developed countries for the period from 1963 to 1992. It
empirically models dimensions of heterogeneity across
countries, allowing for different choices of technology
within both sectors. The paper argues that heterogeneity is
important within sectors across countries implying that an
analysis of aggregate data will not produce useful measures
of the nature of the technology or productivity. It shows
that many of the puzzling elements in aggregate
cross-country empirics can be explained by inappropriate
aggregation across heterogeneous sectors. |
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