A key feature of economic growth is the inevitable structural change across sectors: the agriculture sector shrinks, the service sector rises, and the manufacturing sector performs a hump-shaped pattern. In addition, empirical observations reveal that the historical investment rates in today's...

A striking feature of the structural change literature is that, even though the U.S. economy is often used as a benchmark for calibration, the traditional models cannot account for the steep decline in manufacturing and rise in services in the United States since the late 1970s (Buera et al.,...