Economic growth and restructuring: a test of unbalanced growth models - 1977-1992

Abstract

A model adapted from Baumol (American Economic Review, 57, 1967, 415-426) is used to establish the determinants of growth in per capita commercial service sector output and this service sector's share of employment, based on the experience of Canada, the US, France and Germany. Parameter estimates obtained from the OECD data, for the period 1977–92, are used within the model framework to predict the output and employment dimensions of economic restructuring and growth. A comparison of model predictions with observations suggests the model can explain most of the observed service sector output growth, but it has less success explaining growth in employment shares. These results illustrate the difficulties of confronting the performance of simple models with empirical evidence and the challenge that remains in discovering additional explanations of economic restructuring.