Impacts of Intermediate Trade on Structural Change
39 Pages Posted: 23 Aug 2012
Date Written: August 23, 2012
Traditional structural change theories study the dynamics of inter-sector labour-reallocation in autarky models. We analyse how model-results change if open economy setting is assumed, where we focus on the impacts of intermediate trade in a multi-sector growth model with capital accumulation. We show that, when controlling for specialisation-effects, open economy features a relatively high employment share of capital/manufacturing sector and a relatively low rate of labour-reallocation across consumption industries in comparison to autarky. The process of tertiarisation (transition to a services economy) is relatively slow in the intermediate trade model in comparison to the autarky model.
Keywords: structural change, factor reallocation, labour, multi-sector growth modelling, neoclassical growth theory, trade, intermediates, offshoring
JEL Classification: F16, F43, O14, O41
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