Econometrica Vol. 82 No. 6 2014
Structural Change and the Kaldor Facts in a Growth Model With Relative Price Effects and Non-Gorman Preferences
Abstract
U.S. data reveal three facts: (1) the share of goods in total expenditure declines at a constant rate over time, (2) the price of goods relative to services declines at a constant rate over time, and (3) poor households spend a larger fraction of their budget on goods than do rich households. I provide a macroeconomic model with non-Gorman preferences that rationalizes these facts, along with the aggregate Kaldor facts. The model is parsimonious and admits an analytical solution. Its functional form allows a decomposition of U.S. structural change into an income and substitution effect. Estimates from micro data show each of these effects to be of roughly equal importance.
- DOI
- 10.3982/ecta11354
- Volume
- 82
- Issue
- 6
- Pages
- 2167-2196
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref