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Economic Geography and Structural Change

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  • Clement E. Bohr
  • Marti Mestieri
  • Frederic Robert-Nicoud

Abstract

As countries develop, the relative importance of agriculture declines and economic activity becomes spatially concentrated. We develop a model integrating structural change and regional disparities to jointly capture these phenomena. A key modeling innovation ensuring analytical tractability is the introduction of non-homothetic Cobb-Douglas preferences, which are characterized by constant unitary elasticity of substitution and non-constant income elasticity. As labor productivity increases over time, economic well-being rises, leading to a declining expenditure share on agricultural goods. Labor reallocates away from agriculture, and industry concentrates spatially, further increasing aggregate productivity: structural change and regional disparities are two mutually reinforcing outcomes and propagators of the growth process.

Suggested Citation

  • Clement E. Bohr & Marti Mestieri & Frederic Robert-Nicoud, 2024. "Economic Geography and Structural Change," Papers 2412.03755, arXiv.org.
    • Handle: RePEc:arx:papers:2412.03755
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