Research
PUBLICATIONS
Structural Transformation and Labor Productivity in Brazil with Daniela Costa Brazilian Review of Economics (RBE), 2021
Abstract: This paper examines the labor reallocation across agriculture, manufacturing, and services, and their impacts on aggregate labor productivity in Brazil from 1950 to 2010. We use a multisector model that features nonhomothetic preferences with constant elasticity of substitution and wedge distortions. This framework allows us to decompose the drivers of labor reallocation into supply-side, demand-side, and wedges. For the 1950-2010 period, demand-side effects were responsible for most of the reallocation of labor away from agriculture towards manufacturing and services. On the other hand, if we focus only on the 1980-2010 sub-period, supply-side drivers become the major determinant for labor reallocation.
Accounting for Structural Transformation in the U.S. Journal of Macroeconomics, 2022
Abstract: I account for the sources of labor reallocation from the manufacturing sector towards services in the United States for the 1950 to 2010 period. I use a multi-sector model with sector-specific productivity growth and non-homothetic preferences to decompose the sources of labor reallocation into supply-side, demand-side, and wedge distortions. The decomposition is performed in the context of a competitive economy where the competitive equilibrium with wedges reproduces prices and quantities of the economy exactly. During the 1950-2010 period, the demand-side mechanism accounts for 57% of the reallocation of labor and the supply-side for 28%. Focusing only in the sub-period from 1950 to 1980, 70% of the reallocation is demand-driven. In the sub-period between 1980 and 2010, the three sources of labor reallocation are quantitatively important. Demand-side accounts for 47%, supply-side for 42%, and wedge distortions for 10%.
Structural Change Scenarios Within the SSP Framework with Marian Leimbach and Johannes Koch Futures, 2023
Shared socio-economic pathway (SSP) scenarios represent a consistent set of socio-economic assumptions and a major input of Integrated Assessment Models on climate change. This study added a driver that is missing so far in the SSP framework - the evolution of the sectoral structure of economies. A newly constructed set of structural change scenarios is presented. These structural change scenarios represent a well-known characteristic that accompanies the process of economic growth and development - the reallocation of economic activity between the three major sectors agriculture, manufacturing and services. Based on an econometric approach, we construct scenarios for the sectoral shares of labor, value-added and energy. We find that the pattern and speed of structural change differ under different SSP's. Moreover, while the scenarios for developing countries reproduce structural change patterns (e.g., hump-shape of manufacturing labor share), observed for developed countries in the past, the projected transformation, in particular the reduction of labor shares in the agricultural sector, represents a tremendous challenge.
WORKING PAPERS
Exploring the Role Structural Transformation in Addressing Climate Change with Marian Leimbach, Johannes Koch and Ramiro Parrado Submitted
We develop a global structural transformation integrated assessment model to study the interactions between the sectoral reallocation of economic activity, climate change and mitigation policies. The model integrates global climate-economy interactions and sectoral heterogeneity in climate vulnerabilities and mitigation capabilities. We quantify distributional effects across regions and sectors due to regional coordination and damages from climate change. We find that global coordination leads to a decrease in global emissions, welfare gains for developing regions, and a decrease in emission intensity in all regions. On the sectoral level, we find that global coordination leads to shift from agriculture and manufacturing towards services, where production is less energy intensive and substitution of energy sources is easier. The exception is SSA, where the manufacturing sector grows in the short-term in order to sustain the increase in investment associated with lower damages and higher economic growth. The contribution of structural transformation in the reduction of emission intensity varies significantly between regions, accounting between 1.5% and 37% of the overall decline, yet remains secondary to the role of sector-level emission intensity reductions. Further results suggest that in low-income countries, increasing climate damages may trap labor in the agricultural sector, threatening to disrupt their development.
Rainfall and Structural Transformation in Sub-Saharan Africa
Abstract: Several countries of Sub-Saharan Africa have experienced episodes of long-lasting droughts throughout the 1970-2014 period. I examine the impacts of rainfall in the reallocation of labor from agriculture towards non-agriculture, and on aggregate labor productivity. I use a structural transformation model with agricultural and non-agricultural sectors, whose production functions use only labor as input, and rainfall impacts both the level and the growth of labor productivity. I find a significant negative impact of rainfall shortage on agricultural labor productivity, which translated into a slower process of labor reallocation out of agriculture. This negative impact was particularly severe in the countries of Western Africa.
Structural Transformation and Energy Productivity
Abstract: I investigate the interaction between the process of structural transformation - reallocation of labor and production across agriculture, manufacturing and services - and aggregate energy productivity. I use a multi-sector model of structural transformation to measure energy and labor productivity levels in the United States, Europe and Japan. Energy productivity levels in manufacturing and services are higher in Europe and Japan than in the United States, in general. Differences in manufacturing energy productivity account for most of the aggregate energy productivity gap. Energy productivity of the services sector is the main contributor for the catching-up process of aggregate energy productivity of the United States.
ICT and Aggregate Energy Demand
Previously circulated as ICT and Energy Use: A Macroeconomic Approach
Abstract: Since the 1960s, there has been a fast accumulation of information and communication technology (ICT) capital in the U.S. A key difference between ICT and non-ICT capital is that ICT only requires electricity to operate while non-ICT requires electric and non-electric energy. In this paper, I quantify the impact of the capital composition change on the aggregate energy demand of the U.S. during the 1960-2017 period. I find that the fast adoption of ICT has caused a significant reduction in the aggregate use of energy. While it had essentially no impact on electricity demand, the drop comes entirely from lower demand for non-electric energy. As the relative price of ICT declines, firms substitute non-ICT for ICT as input of production, which reduces the demand for non-electric energy.
WORK IN PROGRESS
Abstract: Carbon debt refers to the value of the negative externalities caused by the emissions of a country. In this paper, I quantify the carbon debt of 132 countries for the 1950-2019 period. At a global level, the carbon debt amounts to $28.5 trillion. For the U.S., the carbon debt is $5.9 trillion, for Europe is $4.5 trillion and for China, $5.7 trillion. The average global debt per capita is $4079. The debt per capita is $18646 for the U.S., $9173 for Europe, and $4055 for China. I consider alternative measures that, in general, indicate a positive association between income and carbon debt.
Intergenerational Carbon Externality and Credible Policy (slides, summary)