Testing the growth effects of structural change

Against the backdrop of Baumol's model of unbalanced growth, a recent strand of literature has presented models that manage to reconcile structural change with Kaldor's stylized fact of the relative constancy of per-capita GDP growth. Another strand of literature goes beyond this, arguing that the expenditure shifts toward Baumol's stagnant sector stimulate rather than dampen long-term economic growth because of the human capital-accumulating nature of major stagnant services (like health care and education). This paper tests the relationship between structural change and economic growth empirically by means of a Granger-causality analysis of a panel of 18 OECD countries.