Research
Working Papers
Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters [New Version]
I analyze a disaggregated structural change model for the US economy in the post-Second World War period. My results reveal that the positive correlation between the relative price and the relative quantity of services with respect to goods, a fact that challenges CES preferences commonly used in the structural change literature, largely reflects the heterogeneous makeup of the services sector. I show that a preference specification where service industries with high productivity growth (progressive services) are separated from the rest of services can account for this positive correlation without any income effects. Consistent with the development facts, the disaggregated structural change model I consider implicates a hump for the relative price of investment. Regarding structural change in investment, the results of the disaggregated model differ from the existing literature. More specifically, the price of services relative to goods declines over time and the rise of the services sector in investment reflects the substitutability between goods and services.
My results show that Baumol's cost disease becomes less relevant over development. I argue that the existence of services sub-sectors with high-productivity growth rates, progressive services, and their substitutability with other sectors in the economy rationalize these facts. A model consistent with these stylized facts predict that Baumol's cost disease would depress aggregate productivity growth rate less in the future for developed countries. My results also show that although developed countries have caught-up the US in the low-productivity growth services sub-sectors, stagnant services, the opposite conclusions emerge for the progressive/business services.
Publications
Industry and Innovation, 30:2, 263-285
Work in Progress
Digitalization and Productivity Growth Slowdown in Production Networks