We assess how the properties of technology affect structural transformation, i.e., the reallocation of production factors across the broad sectors of agriculture, manufacturing, and services. To this end, we estimate sectoral constant elasticity of substitution (CES) and Cobb-Douglas production functions on postwar US data. We find that differences in technical progress across the three sectors are the dominant force behind structural transformation whereas other differences across sectoral technology are of second order importance. Our findings imply that Cobb-Douglas sectoral production functions that differ only in technical progress capture the main technological forces behind the postwar US structural transformation. (JEL E16, E25, O33, O47)
Herrendorf, Berthold, Christopher Herrington, and Ákos Valentinyi.
"Sectoral Technology and Structural Transformation."
American Economic Journal: Macroeconomics,
General Aggregative Models: Social Accounting Matrix
Aggregate Factor Income Distribution
Technological Change: Choices and Consequences; Diffusion Processes
Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence