Does home production drive structural transformation?

Vol: 
19/2016
Author name: 
Moro A
Moleshi S
Tanaka S
Year: 
2016
Month: 
April
Abstract: 

Using new home production data for the U.S., we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report two main findings. First, the estimation results show that home services have a lower income elasticity than market services. Second, the slowdown in home labor productivity, started in the late 70s, is a key determinant of the rise of market services. Our counterfactual experiment shows that, without the slowdown, the share of market services would be lower by 5.8% in 2010.

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