Mike Sposi (Principal Investigator) and Jing Zhang (Co-investigator, Chicago Fed) received a grant that is funded by the Structural Transformation and Economic Growth research initiative, a consortium led by Centre for Economic Policy Research. The research will examine “Cross-Country Differences in Sectoral Output, Employment, and Income”.
Structural change – the reallocation of labor from agriculture to manufacturing, then later from manufacturing to services – is an integral part of economic growth. In general, sectoral employment shares exhibit similar dynamics as the sectoral value added shares in high-income countries, but not in low-income countries. The magnitude of the “wedge” between sectoral employment share and sectoral value added shares is also positively correlated with income per capita.
The research aims to explore determinants of the sectoral wedges in low- and middle-income countries, and to study how they impact growth and income differences through structural change.