Structural Transformation of Occupation Employment

We use census data to show that structural transformation reflects a fundamental reallocation of labour from goods to services, instead of a relabelling that occurs when goods‐producing firms outsource their in‐house service production. The novelty of our approach is that it categorizes labour by occupations, which are invariant to outsourcing. We find that the reallocation of labour from goods‐producing to service‐producing occupations is a robust feature in censuses from around the world and different time periods. To understand the underlying forces, we propose a tractable model in which uneven occupation‐specific technological change generates structural transformation of occupation employment.