Structural Transformation, the Mismeasurement of Productivity Growth, and the Cost Disease of Services
Year: 2014
Type: article
Abstract: If workers self-select into industries based upon their relative productivity in different tasks, and comparative advantage is aligned with absolute advantage, then the average efficacy of a sector's workforce will be negatively correlated with its employment share. This might explain the difference in the reported productivity growth of contracting goods and expanding services. Instrumenting with defense expenditures, I find the elasticity of worker efficacy with respect to employment shares is substantially negative, albeit estimated imprecisely. The estimates suggest that the view that goods and services have similar productivity growth rates is a plausible alternative characterization of growth in developed economies. (JEL E23, E24, H56, J24, O41, O47)
Source: American Economic Review
Author: Alwyn Young
Institution: London School of Economics and Political Science
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W1522182069