Essays on growth and development

Saenz Munoz, Luis Felipe

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Description

Title

Essays on growth and development

Author(s)

Saenz Munoz, Luis Felipe

Issue Date

2018-04-13

Director of Research (if dissertation) or Advisor (if thesis)

Parente, Stephen L.

Doctoral Committee Chair(s)

Parente, Stephen L.

Committee Member(s)

• Villamil, Anne P.
• Bucheli, Marcelo
• Zhao, Rui

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Structural transformation
• deindustrialization.

Abstract

"This dissertation is composed by three chapters evolving around the role of deindustrialization in the process of growth and development. This first chapter focuses on the manufacturing's share of employment, which is known to follow a hump-shaped pattern as economies structurally transform. Motivated by the observation that capital intensities in manufacturing increase over the development process, this chapter examines whether such changes are important in accounting for the hump-shaped pattern in manufacturing employment shares as well as the decline in agriculture and the rise in services. It does this by putting forth a model of the structural transformation that allows for varying rates of technological rates, long-run Engel curves, international trade, as well as time-varying capital intensities. The model is calibrated to the experience of South Korea between 1970 and 2010 and the importance of these four factors for the structural transformation is analyzed. The main finding is that whereas heterogeneous rates of technological change, long-run Engel curves and international trade are important for accounting for various elements of the structural transformation, only time-varying capital intensities are critical for generating the hump-shaped pattern in manufacturing employment fairly close. Time-varying capital intensities are the additional ""labor push"" needed to explain the observed movement of labor out of manufacturing. The second chapter provides quantitative evidence of the Ricardian Effect, namely the replacement of labor in the production process when capital is introduced. Based on a unique plant-level longitudinal dataset for Colombian manufacturing establishments for the period 1982-1998, this article exploits the disaggregation of the labor force between non-production (managers) and production (workers) employees to test whether there is supporting evidence of the Ricardian Effect in Colombia; whether this effect varies between two qualitatively different types of labor; and whether this effect was influenced by the so-called ""market oriented reforms"" that Colombia experienced during the early 1990s. After estimating input demands for capital, managers, and workers instrumenting output with demand shocks, I found that the output elasticities for the three inputs are close to 0.6, while the price elasticities for capital, managers, and workers are -0.28, -0.32, and -0.21 respectively. Based on a simulated arrival of cheaper capital goods, these input demand coefficients are used to predict that, on average, when a plant increases its capital stock by about 67 per cent, it will reduce its payroll by one manager and 4 workers. Capital replaces labor, and this replacement is stronger for employees that perform routine tasks in the work place. This replacement is significantly stronger during the post-reform years since these reforms turned input demands to be more elastic with respect to prices. Importantly, these effects are not driven by plant's observable characteristics. The last chapter, written in collaboration with Cesare Buiatti and Joao Duarte, seeks to explain labor productivity differences of the service sector between Europe and the U.S. through the labor allocation taking place within the service sector. We are interested in understanding why is Europe falling behind the United States in terms of aggregate labor productivity. We measure labor productivity levels using a multi-sector structural transformation model that decomposes services into 11 sub-sectors comparable across Europe and the U.S. It is well known that the underperformance of Europe vis-à-vis the U.S. is related to services. We use our structural transformation model to find which service sectors are largely responsible for the lagging behind. We identify wholesale and retail trade as well as business services as the two sectors responsible for most of the lack of catch up in labor productivity between Europe and the U.S."

Graduation Semester

2018-05

Type of Resource

text

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Copyright and License Information

Copyright 2018 Luis Felipe Sáenz

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