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A Theory of Structural Change That Can Fit the Data

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  • Simon Alder
  • Timo Boppart
  • Andreas Müller

Abstract

We study structural change in the historical consumption expenditure of the United States, the United Kingdom, Canada, and Australia over more than a century. We characterize the most general class of preferences in a time-additive setting that admits aggregation of the saving decision and allows us to identify preference parameters from aggregate data. We parameterize and estimate such intertemporally aggregable (IA) preferences and discuss their properties in a dynamic general equilibrium framework with sustained growth. Our preference class is considerably more flexible than the Gorman form or PIGL, giving rise to a good fit of the non-monotonic pattern of structural change.

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  • Simon Alder & Timo Boppart & Andreas Müller, 2022. "A Theory of Structural Change That Can Fit the Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(2), pages 160-206, April.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:2:p:160-206
    DOI: 10.1257/mac.20190303
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    1. Federico Huneeus, 2020. "Heterogeneous Paths of Industrialization," Cowles Foundation Discussion Papers 2253, Cowles Foundation for Research in Economics, Yale University.
    2. Fang, Lei & Herrendorf, Berthold, 2021. "High-skilled services and development in China," Journal of Development Economics, Elsevier, vol. 151(C).
    3. Fabian Eckert & Michael Peters, 2018. "Spatial Structural Change," 2018 Meeting Papers 98, Society for Economic Dynamics.
    4. Ali Sen, 2024. "Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters," Working Papers 048, The Productivity Institute.
    5. Francisco J. Buera & Joseph P. Kaboski & Martí Mestieri & Daniel G. O'Connor, 2020. "The Stable Transformation Path," NBER Working Papers 27731, National Bureau of Economic Research, Inc.
    6. Casey, Gregory & Fried, Stephie & Gibson, Matthew, 2024. "Understanding climate damages: Consumption versus investment," European Economic Review, Elsevier, vol. 167(C).
    7. Manuel García‐Santana & Josep Pijoan‐Mas & Lucciano Villacorta, 2021. "Investment Demand and Structural Change," Econometrica, Econometric Society, vol. 89(6), pages 2751-2785, November.
    8. David R Baqaee & Ariel Burstein, 2023. "Welfare and Output With Income Effects and Taste Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(2), pages 769-834.
    9. Margarida Duarte & Diego Restuccia, 2020. "Relative Prices and Sectoral Productivity," Journal of the European Economic Association, European Economic Association, vol. 18(3), pages 1400-1443.
    10. Storesletten, Kjetil & Zhao, Bo & Zilibotti, Fabrizio, 2020. "Business Cycle during Structural Change: Arthur Lewis’ Theory from a Neoclassical Perspective," CEPR Discussion Papers 14964, C.E.P.R. Discussion Papers.
    11. Kjetil Storesletten & Bo Zhao & Fabrizio Zilibotti, 2019. "Business Cycle during Structural Change: Arthur Lewis' Theory from a Neoclassical Perspective," Cowles Foundation Discussion Papers 2191, Cowles Foundation for Research in Economics, Yale University.
    12. Hao, Tongtong & Sun, Ruiqi & Tombe, Trevor & Zhu, Xiaodong, 2020. "The effect of migration policy on growth, structural change, and regional inequality in China," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 112-134.
    13. Sen, Ali, 2020. "Structural change within the services sector, Baumol's cost disease, and cross-country productivity differences," MPRA Paper 99614, University Library of Munich, Germany.
    14. Ferriere, Axelle & Grübener, Philipp & Sachs, Dominik, 2024. "Optimal Redistribution: Rising Inequality vs. Rising Living Standards," CEPR Discussion Papers 19107, C.E.P.R. Discussion Papers.
    15. Fabio Monteforte & Mathan Satchi & Jonathan R. W. Temple, 2021. "Development priorities: the relative benefits of agricultural growth," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1122-1152.
    16. Cao, Huoqing & Chen, Chaoran & Xi, Xican, 2024. "Home Production and Gender Gap in Structural Change," MPRA Paper 122334, University Library of Munich, Germany.
    17. Howes, Cooper, 2022. "Why does structural change accelerate in recessions? The credit reallocation channel," Journal of Financial Economics, Elsevier, vol. 144(3), pages 933-952.
    18. Fangzhi Wang & Hua Liao & Richard S. J. Tol, 2023. "Baumol's Climate Disease," Papers 2312.00160, arXiv.org.
    19. Marcolino, Marcos, 2022. "Accounting for structural transformation in the U.S," Journal of Macroeconomics, Elsevier, vol. 71(C).
    20. Pan, Xiameng & Sun, Chang, 2024. "Internal migration, remittances and economic development," Journal of International Economics, Elsevier, vol. 147(C).

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    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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