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Two perspectives on preferences and structural transformation

Herrendorf, Berthold, Rogerson, Richard and Valentinyi, Ákos (2013) Two perspectives on preferences and structural transformation. American Economic Review, 103 (7). pp. 2752-2789. ISSN 0002-8282

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Identification Number: 10.1257/aer.103.7.2752


We assess the empirical importance of changes in income and relative prices for structural transformation in the postwar United States. We explain two natural approaches to the data: sectors may be categories of final expenditure or value added; e.g., the service sector may be the final expenditure on services or the value added from service industries. We estimate preferences for each approach and find that with final expenditure income effects are the dominant force behind structural transformation, whereas with value-added categories price effects are more important. We show how the inputoutput structure of the United States can reconcile these findings.

Item Type: Article
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Additional Information: © 2013 AEA
Divisions: LSE
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure; Industrial Price Indices
Date Deposited: 28 Oct 2014 09:46
Last Modified: 17 Jul 2024 07:06
Projects: Grants SEJ2006–05710 ECON and ECO2009-11165, WCU–R33–10005, K–105660–ny
Funders: Spanish Ministry of Education, NSF, Korea Science Foundation, Hungarian Scientific Research Fund (OTKA)

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