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Kuznets meets Lucas: Structural Change and Human Capital

Cruz, Edgar (2018): Kuznets meets Lucas: Structural Change and Human Capital.

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Abstract

This paper develops a multi-sector growth model with human capital accumulation. In this model, human capital induces structural change through two channels: changes in relative prices and changes in the investment rate of physical and human capital. We show that the specifications of the model give rise to a generalized balanced growth path. Furthermore, we show that the model is consistent with (i) the decline in agriculture, (ii) the hump-shaped of manufacturing, (iii) the rise of the services sector and (iv) the path of human capital accumulation in the U.S economy during the twenty century. Given our findings, we outline that imbalances between physical and human capital contribute to explain cross-country differences in the pace of structural change.

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