Empirical Microeconomics Seminar - Ali Sen

Abstract: 

I analyze a disaggregated structural change model that takes into account the heterogeneity within the broadly defined sectors of the economy. The positive correlation between nominal and real value-added shares of the services, a fact that discredits CES preferences commonly applied in the structural change literature, largely reflects the heterogenous make-up of the services. I show that a model where the service industries with high-productivity growth are separated from the rest of the services can generate this positive correlation without any income effects. Consistent with the stylized facts, the disaggregated structural change model I consider implicates a hump-shaped pattern for the relative price of investment against consumption. Concerning structural change within investment the results of the disaggregated model in general contrast with the existing literature.