Sectoral Composition Of Output Research Articles

Understanding Pandemic Crisis in a Dependent Economy: A Structuralist Analysis

The pandemic crisis and associated lockdown have led to diminution in demand on one hand and different types of supply side bottlenecks on the other. The article makes a theoretical attempt to assess macroeconomic dimensions of COVID-19 along with consequences of such crisis using a two-sector dependent economy model. In particular, the article investigates the implications of unanticipated adverse shock such as COVID-19 and wage cut for the dynamic interaction of Tobin’s q, price of non-traded goods and the exchange rate and sectoral composition of output and level of employment. The effects of expansionary fiscal policy and increase in risk premium are also highlighted as the part of concluding remarks. The results in this article critically depend on the difference in the speeds of adjustments in the Tobin’s q, exchange rate and price of non-traded goods and different types of cross effects emanating from changes in interconnected macroeconomic variables. While the pandemic crisis leads to contraction of all the sectors and decrease in level of employment in the short-run with uncertain medium-run implications, the wage cut somewhat arrests the fall in employment. JEL Codes: E24, F41, G12

Sectoral composition of output and the wage share: The role of the service sector

This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers’ preferences or in the saving rate. When mark-ups are relatively higher in the service sector, we show that: i) a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share; ii) a preferences’ shock in favor of the service sector raises growth if the price of the service good is sufficiently high.

Policy shocks, current account and the macroeconomy in a developing country

Purpose This is a theoretical paper in the field of international macroeconomics. The purpose of this paper is to focus on a dynamic interaction between current account imbalance and unemployment in response to some policy-induced shocks for a small open economy under a flexible exchange rate. Design/methodology/approach The paper uses a two-sector framework: one sector is traded and another is the non-traded sector that is subject to an effective demand constraint. The current account imbalance arises due to the discrepancy between production of traded goods, household consumption of traded goods and government purchases of importables. The authors keep the asset structure simple by considering only domestic currency and foreign bonds that are imperfect substitutes. The paper considers a standard methodology of dynamic adjustment process involving change in foreign exchange reserves and exchange rate under perfect foresight. The saddle path properties of the equilibrium are also examined. Findings The results of comparative static exercises depend on a set of structural features of a developing country, which include asset substitutability, wage price rigidity and sectoral asymmetries. The paper shows that expansionary monetary policy, balanced budget fiscal expansion and financial liberalization have an ambiguous effect on the current account balance, foreign exchange reserves, non-traded sector and the level of employment. Originality/value The existence of Keynesian unemployment with fixed prices is the key ingredient of this paper. The paper introduces the problem of effective demand to analyze the dynamics of current account balance and exchange rate, which, in turn, determine the sectoral composition of output and level of employment.

Dualism, exchange rate, and employment: a structuralist model

This paper describes an open economy framework for macroeconomic analysis of sectoral inter-linkage in the presence of dualism in interconnected markets. In particular, we will address different dimensions of dualism in the product market, the credit market and the labour market as well. The product market dualism is the coexistence of an agricultural sector and a demand-constrained industrial sector. The credit market dualism is characterized by existence of formal and informal credit. The dualistic labour market consists of skilled and unskilled workers. We will construct a structuralist model to examine the effects of different macroeconomic policies, namely interest rate policy, capital account liberalization, fiscal policy and administered price policy on employment, the wage gap between skilled and unskilled workers, and sectoral composition of output. The results in this paper critically depend on interactions among food price, industrial output, exchange rate, and interest rates of informal credit market, and wage rate of unskilled workers and multitude of cross effects generated by changes in these prices in response to policy induced shocks. This paper shows that capital account liberalization can generate a contractionary effect in a developing country, while the policy of lowering formal interest rate leads to expansion of both agricultural and industrial sectors which in turn causes employment generation in an emerging market economy.

Structural Change and Income Inequality – Agricultural Development and Inter-sectoral Dualism in the Developing World, 1960-2010

Structural change consists of the long-term changes in the sectoral composition of output and employment. We introduce a structural change perspective to the study of income inequality in 27 countries of the developing world for the period 1960-2010. The service sector has become the main employer, but the agricultural sector is central to the income distribution because poverty is mostly rural, and the labor surplus is high. We decompose the sectoral composition of aggregate labor productivity at the country level, divide the countries into agrarian, dual (beginner, intermediate and advanced), and mature economies and use the inter-sectoral productivity gap to test the effect of structural change on income inequality. We confirm increases in agricultural productivity everywhere and find that the inter-sectoral gap is positively associated with income inequality. The effect is negligible in agrarian and advanced economies but powerful in dual beginner economies: an increase of 1% in the inter-sectoral gap increases income inequality by 0.5%. The effect peters out in dual intermediate economies and disappears completely in dual advanced economies. Finally, redistribution has been the key to compensating the losers in the income changes, particularly for those entering the non-agricultural economy.

Macroeconomic Performance, Stability, and Sectoral Composition of Output Before and After AKP over the Post-Liberalization Era

Macroeconomic Performance, Stability, and Sectoral Composition of Output Before and After AKP over the Post-Liberalization Era

Fiscal policy, net exports, and the sectoral composition of output in Greece

This paper investigates the effects of fiscal policy shocks on net export performance and the sectoral composition of output in Greece in the post 2000 period. A reduction in government spending (or tax hike) exerts a negative response on output which reduces import demand. A cut back in government spending boosts exports through the labor cost competitiveness channel further improving net exports. Tax hikes in particular on social security contributions and other indirect taxes reduce export performance. Although real aggregate output declines following a cut in government spending, the tradable sector output responds positively, further improving net exports.

Fiscal Policy, Net Exports, and the Sectoral Composition of Output in Greece

This paper investigates the effects of fiscal policy shocks on net export performance and the sectoral composition of output in Greece in the post 2000 period. A reduction in government spending (or a tax hike) exerts a negative response on output which reduces import demand. A cut back in government spending boosts exports through the labour cost competitiveness channel further improving net exports. Tax hikes in particular on social security contributions and other indirect taxes reduce export performance. Although real aggregate output declines following a cut in government spending, the tradable sector output responds positively, further improving net exports.

Structural Transformation in Out-put in J&K State Economy (1981-2011)

The structural change theory states that as GDP per capita increases, the % share of out-put in primary sector declines whereas the % share of the secondary sector initially increases and subsequently decreases ,while the % share of tertiary sector increases steadily. The structural change in out-put across Jammu & Kashmir economy's key is not following the path way of the structural change theory of out- put which implies that percentage share of out-put in primary sector declines systematically as GNP per capita income rises whereas the percentage share of both secondary and tertiary out-put rise to offset this decline. But, this offset takes place in such a manner that at first stage of structural change theory, major percentage share of out-put reallocates to secondary sector (almost 75%) and the rest is reallocated to tertiary sector and during the second stage of structural change theory of out-put, shift of out-put from primary and secondary sector takes place to tertiary sector. Keywords: Key sectors, Structural Transformation theory of Out-put, Structural Change Index (SCI), Linking Factor Method, growth rates I. Introduction The structural change in output and employment are considered to be important indicators to measure the economic performance of the economy. The sectoral composition of output and employment are the most crucial indicators to measure the contribution of the different of the state economy. One of the best known characteristics of output and labour in developing economies is that most output comes from primary sector and most labour force work in the same sector. Primary share of output and employment is highest in the poorest economies and declines systematically as GNP per capita rises. The shares of both secondary and tertiary sectors output and employment rise to offset this decline. But, during the first stage of the structural change theory, most resources shifted from primary to secondary sector and then finally in the second stage of the structural change theory resources shifted from both primary and the secondary to the tertiary sector of the economy. There happens inter-sectoral equality in case of output and employment among the three main of the economy. The concept of inter-sectoral equality refers that all the three main contribution in terms of output and employment are the same. The inter-sectoral equality is the indication of the absences of disguised unemployment among the key of the economy. In simple words, it is believed by the structural economists that inter-sectoral equality in terms of output and employment between the three key of the economy is the important indicator to check the overall health of the state economy as it depicts the equality in productivity and income of an economy. Objectives Some of the explicit objectives of the study are as under: 1. To analyze the changes in growth rates and composition of output in the key of the state economy.

Fiscal Shocks and The Sectoral Composition of Output

We study the impact of shocks to different types of government spending on the sectoral composition of output for a panel of EMU member countries. We find that fiscal shocks lead to an increase in the relative size of the nontraded sector, with the impact varying across the different spending categories. There is typically no significant impact on the level of production in the tradables sector but the level of imports increases and the level of exports declines in most cases. Overall, the results show that fiscal shocks matter not only for aggregate variables but also for the sectoral composition of output. The sectoral output results are consistent with previous work concerning the impact of fiscal shocks on the real exchange rate and the relative price of nontradables.

Relative underperformance Alla Turca

From 1960 to 2003, Turkey has underperformed relative to several Western economies, in terms of hours worked and output per hour. Our sectoral analysis illustrates two points. First, Turkey's large drop in hours is due to the fact that the substantial decline in agricultural hours has not been accompanied by a corresponding increase in nonagricultural market hours. Second, the sectoral composition of output is important for understanding Turkey's relatively weak rise in output per hour. We develop a simple model of structural transformation and home production to provide an account of Turkey's performance relative to the U.S. and Southern Europe. We find that the evolution of exogenous differences in sectoral productivity and taxes, between Turkey and the U.S., as well as Southern Europe, can account quantitatively for most of Turkey's relative underperformance to these regions.

International Productivity Differences, Infrastructure, and Comparative Advantage*

AbstractThis paper provides an empirical analysis of the effect of infrastructure provision on industry‐level productivity and international specialization, as suggested by Clarida and Findlay’s (1992) model. We calculate total factor productivity (TFP) for 18 developed and developing countries and 10 manufacturing industries, and study the effects of supplies of roads, telecommunications and electric power on international variations in sectoral TFP, i.e. comparative advantage. We also examine the effects of infrastructure on the sectoral composition of output across countries. Using a three‐stage least‐squares estimation strategy to control for endogeneity of infrastructure provision, we find that infrastructure, especially roads, helps to explain patterns of comparative advantage and international specialization.

Economic development, poverty reduction and carbon emissions in India

This paper analyses carbon dioxide (CO 2) emissions from energy consumption using an input-output (I-O) model, for different sectors of the Indian economy in 1990. Alternative scenarios are developed for 2005. The I-O model considers structural changes in aggregate consumption behaviour and sectoral composition of output between 1990 and 2005. Alternative energy efficiency programmes are compared for their potential CO 2 reduction in 2005. Under ambitious poverty reduction targets, the annual growth rate of CO 2 emissions increases from 4.8% to 5.9%. However, energy efficiency programmes could reduce the average annual growth rate of CO 2 emissions back to 4.9%. It is also seen that reducing CO 2 through oil conservation is a preferred policy for India compared with saving coal.

Booming‐sector economic activity in Paraguay 1973–86: A case of dutch disease?

The primary purpose of this study is to investigate the applicability of the ‘Dutch Disease’ model as a means of explaining the changing sectoral composition of output for Paraguay in the period 1973–86. The consequences of ‘booming‐sector’ activity for: (1) the distribution of income as it affects wages; and (2) the (in)stability of export earnings for Paraguay are examined. The Dutch Disease model predicts that the consequences of booming activity will include a contraction of non‐booming sector activity as well as a real appreciation of the exchange rate. These outcomes are tested in several single and multiple‐equation estimable models for the case of Paraguay.

DOES EXCHANGE RATE APPRECIATION ‘DEINDUSTRIALIZE’ THE OPEN ECONOMY? A CRITIQUE OF U.S. EVIDENCE

This paper takes a critical look at the conventional view that the dollar exchange rate appreciation during the early 1980s caused a major resource shift in the U.S. economy away from tradables production, such as manufactures, toward nontradables production. We argue that the association of a dollar appreciation with relative strength or weakness in the tradable goods sector depends on the particular shock causing the appreciation, and consequently that the relation between exchange rates and the sectoral composition of output is unlikely to be stable over time. Our empirical analysis finds evidence of instability in the exchange rate–sectoral output link and of a positive association between tradables output and fiscal stimulus.

Trade and structural change: NICs and next tier NICs as transitional economies

The paper finds a strong association between rapid change in the sectoral composition of output and exports (structural change) and rapid export growth in the newly industrializing countries. Capital formation appears to be encouraged in dynamic economies by the underpricing of investment goods vis-à-vis consumption and government goods within these economies; also the underpricing of investment goods in dynamic economies is relatively greater than in less dynamic economies. Whereas other research has found low price distortion to be associated with high growth and an outward rather than an inward-looking orientation, these associations are seriously challenged and more caution is urged in reaching generalized conclusions.