Structural Transformation and the Volatility of Aggregate Output in OECD Countries
IMF Working Papers, February 15, 2013
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- Structural Transformation and the Volatility of Aggregate Output in OECD Countries
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Bibliographic details
- Authors: Constant A Lonkeng Ngouana
- Published: February 15, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475548716.001
Key findings
- There is a negative relationship between the employment share of the service sector and the volatility of aggregate output in the OECD—after controlling for the level of financial development.
- Labor productivity is more volatile in agriculture and manufacturing than in services; as labor shifts away from agriculture and manufacturing toward services, aggregate output volatility declines.
- The secular shift of labor towards the service sector was volatility-reducing in OECD countries during 1970–2006.
Methodology and model
- Calibrated an indivisible labor model to the U.S. economy in which reallocation of labor across sectors emerges endogenously from sectoral labor productivity growth differentials.
- The model is used to generate the time path of labor shares in agriculture, manufacturing and services for individual countries.
- Performed counterfactual analyses in which the reallocation of labor across sectors is constrained endogenously to assess the quantitative role of structural transformation on aggregate output volatility.
Quantitative and empirical scope
- Time period analyzed for volatility-reducing effect: 1970–2006.
- Model calibration: to the U.S. economy (as the benchmark).
- Sectoral focus: agriculture, manufacturing, services.
- Controls: level of financial development included when estimating the relationship between service-sector employment share and output volatility.
Subjects and keywords (as listed)
- Subjects: Economic growth, Economic sectors, Employment, Labor, Labor productivity, Production, Services sector, Structural transformation
- Keywords: aggregate output, aggregate output growth, aggregate output volatility, Dynamic general equilibrium, Employment, employment share of the service sector, Global, growth differential, Indivisible labor, indivisible labor model, Labor productivity, OECD, Output volatility, reallocation in OECD country, reallocation in the model, reallocation of labor, sectoral labor productivity processes, sectoral labor reallocation in OECD country, service sector, service sector employee, service sector's labor share, Services sector, Structural transformation, WP