Young, Alwyn (2013) Structural transformation, the mismeasurement of productivity growth and the cost disease of services. . London School of Economics and Political Science, London, UK.
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Abstract
If workers self-select into sectors based upon their relative productivity in different tasks, and comparative advantage is aligned with absolute advantage, then as a sector's employment share increases (decreases) the average efficacy of its workforce will fall (rise). This provides a potential explanation for the differential in the measured productivity growth of contracting goods and expanding services. Using changes in defense expenditures as an exogenous shifter of employment shares, I estimate that the elasticity of worker efficacy with respect to employment shares is substantially negative. While conventional estimates indicate that productivity growth in goods is .8% and 1.4% faster than in services in the US and the OECD, respectively, regression point estimates suggest that the true difference might lie between a .5 percent advantage for goods and a .4 percent advantage for services. Taking the middle of this range, the view that goods and services have similar productivity growth rates provides a plausible alternative characterization of growth in developed economies.
| Item Type: | Monograph (Working Paper) |
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| Additional Information: | © 2013 The Author |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions |
| Date Deposited: | 11 Nov 2013 11:42 |
| Last Modified: | 11 Dec 2024 19:11 |
| URI: | http://eprints.lse.ac.uk/id/eprint/54247 |
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