Using a broad panel of advanced economies we document that increases in GDP per capita are associated with a systematic shift in the composition of value added to sectors that are intensive in high-skill labor, a process we label as skill-biased structural change. It follows that further development in these economies leads to an increase in the relative demand for skilled labor. We develop a quantitative two-sector model of this process as a laboratory to assess the sources of the rise of the skill premium in the US and a set of ten other advanced economies, over the period 1977 to 2005. For the US, we find that the sector-specific skill neutral component of technical change accounts for 18-24% of the overall increase of the skill premium due to technical change, and that the mechanism through which this component of technical change affects the skill premium is via skill biased structural change.
Jan 1, 0001
In this paper, I study the effects of the shifts in the occupational structure of the labor market on human capital accumulation. I provide evidence that, as countries develop, employment moves from routine-intensive to cognitive-intensive occupations. In addition, I show that cognitive occupations exhibit higher returns to human capital accumulation via education and experience. I develop a model of endogenous human capital accumulation and occupational choice, where workers optimally decide on their human capital investment profiles and career paths based on their skill endowments and time constraints, allowing for heterogeneous human capital accumulation technologies across occupations. I find that the shift in the occupational structure is a key driver of human capital differences across countries, playing a role that is quantitatively higher than cross-country gaps in educational attainment.
Jan 1, 0001
We develop a continuous time stochastic growth model that is suitable for studying the impact of natural disasters on the short run and long run growth rate of an economy. We find that the growth effects of a natural disaster depend in complicated ways on the details of expected foreign disaster aid and the existence of catastrophe insurance markets. We show that aid can have an influence on investments in prevention and mitigation activities and can delay the recovery from a natural disaster strike.
Jan 1, 0001
We propose a novel explanation for secular stagnation that is linked to the process of structural transformation in post-industrial economies. We merge several data sources on sectoral production and innovation activities to document that while production workers move out of manufacturing and into non-research-intensive services, researchers move out of manufacturing and into researchintensive services, exhibiting divergent paths. We build a general equilibrium model of structural transformation and directed technical change where the sectoral allocation of productive and innovative resources is determined endogenously. We enrich this framework by allowing for heterogeneous, time-varying markups across sectors. The model mimics key features of structural change in employment, expenditure and innovation activity, including the divergent paths in production and innovation. We find that in the absence of structural change and the prevailing demographic trends, TFP would have grown by 62% between 1947 and 2010 in the US, as opposed to the observed TFP growth of 30%, with 87% of the slowdown due to structural change in production and innovation and the remaining 13% due to demographic forces.
Jan 1, 0001