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Population growth and structural transformation

Ho, Chi Pui (2015): Population growth and structural transformation.

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Abstract

Population growth induces structural transformation. We posit two-sector growth models where land is a fixed production factor. When two sectoral goods are consumption complements, population growth pushes production factors towards the sector with stronger diminishing returns to labor through the relative price effect. We clarify conditions when production factors “embrace the land” and “escape from land” throughout development, and the models’ asymptotic growth paths. We calibrate the models to simulate sectoral shifts in pre-industrial England and modern United States. In both cases, relying solely on relative price effects (population growth, technological progress and capital deepening) predicts too slow structural transformation.

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