Existing models of structural change typically assume that all of investment is produced in manufacturing. This assumption is strongly counterfactual: in the postwar US, the share of services value added in investment expenditure has been steadily growing and it now exceeds 0.5. We build a new...

We ask what specification of preferences can account for the changes in the expenditure shares of broad sectors that are associated with the process of structural transformation in the U.S. since 1947. Following the tradition of the expenditure systems literature, we first calibrate utility...

Structural transformation refers to the reallocation of economic activity across the broad sectors agriculture, manufacturing and services. This review article synthesizes and evaluates recent advances in the research on structural transformation. We begin by presenting the stylized facts of...

This paper assesses the importance for structural transformation of three features of sectoral technology: labor-augmenting technological progress, capital intensity, and substitutability between capital and labor. We estimate CES production functions for agriculture, manufacturing, and services...

We assess the empirical importance of income and price effects for structural transformation in the postwar US. We explain two natural approaches to the data: sectors may be categories of final expenditure or value added; e.g., the service sector may be the final expenditure on services or the value...

Many applications in economics use multisector versions of the growth model. In this paper, we measure the income shares of capital and labor at the sectoral level for the U.S. economy. We also decompose the capital shares into the income shares of land, structures, and equipment. We find that...

This paper explores the stability properties of the steady state in the standard two-sector real business cycle model with a sector-specific externality in the capital-producing sector. When the steady state is stable then equilibrium is indeterminate and stable sunspots are possible. We find...

It is well known that if mild sector specific externalities are considered, then the steady state of the standard two-sector real business cycle model can become locally indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard...

This paper explores the local stability properties of the steady state in the twosector neoclassical growth model with sector specific externalities. We show analytically that capital adjustment costs of any size preclude local indeterminacy nearby the steady state for every empirically...