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Demand bias as an explanation for structural change

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  • Gundlach, Erich

Abstract

An income elastic demand for services is usually regarded as one of the major explanations for the observed pattern of structural change in the world economy. Recent empirical findings cast some doubt on this demand-bias hypothesis. This paper presents a simple model of structural change that allows an assessment of the implications of alternative demand elasticities. The analysis focusses on restrictions for the set of consistent parameter values derived from demand theory. The results show that lagging productivity growth in the service sector and a homothetic or income inelastic demand for services do not suffice to explain the stylized facts.

Suggested Citation

  • Gundlach, Erich, 1993. "Demand bias as an explanation for structural change," Kiel Working Papers 594, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:594
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    References listed on IDEAS

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    1. Wolff, Edward N., 1985. "Unbalanced Growth, Capital Accumulation and Productivity Growth," Working Papers 85-19, C.V. Starr Center for Applied Economics, New York University.
    2. Schultz, T Paul, 1985. "Changing World Prices, Women's Wages, and the Fertility Transition: Sweden, 1860-1910," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1126-1154, December.
    3. Gundlach, Erich, 1993. "Die Dienstleistungsnachfrage als Determinante des wirtschaftlichen Strukturwandels," Open Access Publications from Kiel Institute for the World Economy 763, Kiel Institute for the World Economy (IfW Kiel).
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    7. Locay, Luis, 1990. "Economic Development and the Division of Production between Households and Markets," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 965-982, October.
    8. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, vol. 81(1), pages 325-334, March.
    9. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. de Groot, H.L.F., 1998. "The Determination and Development of Sectoral Structure," Discussion Paper 1998-125, Tilburg University, Center for Economic Research.

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