Che, Natasha Xingyuan (2009): Sectoral Structural Change in a Knowledge Economy.
This is the latest version of this item.
Download (467kB) | Preview
The sectoral composition of the US economy has shifted dramatically in the recent decades. At the same time, knowledge and information capital has become increasingly important in modern production processes. This paper argues that a ready explanation for the recent sectoral structural change lies in the difference of intangible capital accumulation across sectors. In the two-sector model of the paper, as the importance of intangible capital increases, labor is shifted from direct goods production to creating sector-specific intangible capital. In the process, the real output and employment shares of the high-intangible sector increase.
The model generates sectoral composition change and labor productivity trend that reasonably match the data. It also shows that conventional labor productivity calculation understates the "true" productivity in sectoral goods production. The underestimation is greater for the growing sector.
The empirical regressions of the paper indicate a positive and significant association between intangible capital investment intensity and firms' future output and employment growth. The correlation is higher for firms in the growing sector. At the industry level, controlling for industry human capital intensity, physical capital intensity and IT investment level, intangible capital intensity is positively correlated with future industry real output and employment share growth. These findings are consistent with the implications of the model.
The paper also presents evidence suggesting that most growing service industries are intangible capital intensive. Thus the theory developed here can also help to reconcile the expansion of the service sector and the seemingly low productivity of the sector.
|Item Type:||MPRA Paper|
|Original Title:||Sectoral Structural Change in a Knowledge Economy|
|Keywords:||Intangible Capital; Structural Change; Knowledge Economy; Firm Investment;|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation: Models and Applications
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E23 - Production
|Depositing User:||Natasha Xingyuan Che|
|Date Deposited:||09. Jan 2010 23:03|
|Last Modified:||12. Feb 2013 20:08|
Acemoglu, D. and Guerrieri, V.: Capital deepening and non-balanced economic growth. Journal of Political Economy, vol. 116, no.3, 467-498 (2008)
Arellano, M. and Bond, S.R.: Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, 277-297 (1991)
Atkeson, A., Kehoe, P.: Modeling and measuring organization capital. Journal of Political Economy, vol. 113, no. 5, 1026-1053 (2005)
Baumol, W.J.: Macroeconomics of unbalanced growth: the anatomy of urban crisis. The American Economic Review 57, 415-426 (1967)
Brynjolfsson, E.: Information assets, technology, and organization. Management Science, vol. 40, No. 12, 1645-1662 (1994)
Brynjolfsson, E., Hitt, E.L., Yang, S.: Intangible assets: computers and organizational capital. Brookings Papers on Economic Activity, 1, 137-198 (2002)
Brynjolfsson, E., Saunders, A.: Wired for innovation: how information technology is reshaping the economy. MIT Press (2009)
Buera, F. J. and Kaboski, J. P.: The rise of the service economy. mimeo (2007)
Corrado, C., Hulten, C., Sichel, D.: Measuring capital and technology: an expanded framework. In Measuring Capital in the New Economy, C. Corrado, J. Haltiwanger, D. Sichel, eds., Studies in Income and Wealth, vol. 65. Chicago: The University of Chicago Press (2005)
Corrado, C., Hulten, C.R., Sichel, D.E.: Intangible capital and economic growth. Finance and Economics discussion series 2006-24, the Federal Reserve Board (2006)
Danthine, J.P. and Jin, X.: Intangible Capital, corporate valuation and asset pricing. Economic Theory 32, 157-177 (2007)
Echevarria, C.: Changes in sectoral composition associated with economic growth. International Economics Review 38: 431-452
Greenwood, J., Hercowitz, Z., Krusell, P.: Long-run implications of investment-specific technological change. The American Economic Review, vol. 87, no. 3, 342-362 (1997)
Hall, R.E.: The stock market and capital accumulation. American Economic Review 91, 1185-1202 (2001)
Kongsamut, P., Rebelo, S. and Xie, D.: Beyond balanced growth. Review of Economic Studies 68, 869-882
Kuznets, S.: Modern economic growth: findings and reflections. The American Economic Review 63: 247-258 (1973)
Laitner, J.: Structural change and economic growth. review of Economic Studies 67, 545-561 (2000)
Lev, B.: Intangibles: Management, Measurement, and Reporting. Washington, DC: Brookings Institution (2001)
McGrattan, E.R., Prescott, E.C.: Unmeasured investment and the puzzling US boom in the 1990s. Research department staff report 369, Federal Reserve Bank of Minneapolis (2007)
Nakamura, L.: What is the US gross investment in intangibles? (at least) one trillion dollars a year! Federal Reserve Bank of Philadelphia Working Paper, No. 01-15 (2001)
Ngai, L.R. and Pissarides, C. A.: Structural change in a multi-sector model of growth. The American Economic Review 97, 429-443 (2007)
Oulton, N.: Must the growth rate decline? Baumol's unbalanced growth revisited. Oxford Economic Papers 53, 605-627 (2001)
Prescott, E.C. and Visscher, M.: Organization capital. Journal of Political Economy, vol. 88, no. 3, 446-461 (1980)
Rossi-Hansberg, E. and Wright, L.J.: Establishment size dynamics in the aggregate economy. American Economics Review, vol. 97, no. 5, 1639-1666. (2007)
Available Versions of this Item
- Sectoral Structural Change in a Knowledge Economy. (deposited 09. Jan 2010 23:03) [Currently Displayed]