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Impacts of Intermediate Trade on Structural Change

Stijepic, Denis and Wagner, Helmut (2008): Impacts of Intermediate Trade on Structural Change.

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Abstract

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.

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