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Structural transformation, the mismeasurement of productivity growth, and the cost disease of services

Young, Alwyn (2014) Structural transformation, the mismeasurement of productivity growth, and the cost disease of services. American Economic Review, 104 (11). pp. 3635-3667. ISSN 0002-8282

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Identification Number: 10.1257/aer.104.11.3635

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.

Item Type: Article
Official URL: https://www.aeaweb.org/aer/index.php
Additional Information: © 2014 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Sets: Departments > Economics
Date Deposited: 21 Nov 2014 10:54
Last Modified: 20 Nov 2019 11:12
URI: http://eprints.lse.ac.uk/id/eprint/60213

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