We use a two-sector model of structural transformation and balanced growth to show that the real ... more We use a two-sector model of structural transformation and balanced growth to show that the real interest rate, measured as the return on capital in units of GDP or in units of aggregate consumption, declines as income grows. This is due to the differential TFP growth in the goods producing sector relative to the services sector. This differential drives a relative price change that triggers a steady decline in the rate of return on capital along the growth path. We calibrate the model to U.S. data to reproduce the behavior of GDP, the share of services in consumption, the relative price goods/services and the investment/output ratio in the period 1950-2015. We find that the calibrated model displays a decline of the real interest rate of 36% in terms of units of GDP and of 43% in terms of units of aggregate consumption during the period considered.
The Working Paper Series seeks to disseminate original research in economics and fi nance. All pa... more The Working Paper Series seeks to disseminate original research in economics and fi nance. All papers have been anonymously refereed. By publishing these papers, the Banco de España aims to contribute to economic analysis and, in particular, to knowledge of the Spanish economy and its international environment. The opinions and analyses in the Working Paper Series are the responsibility of the authors and, therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem. The Banco de España disseminates its main reports and most of its publications via the Internet at the following website: . Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.
One of the important facts on marriage that has not been emphasized in the literature is the hump... more One of the important facts on marriage that has not been emphasized in the literature is the hump-shaped pattern of the prevalence of marriage in the U.S. over the last 100 years. In this paper, we study the mutual relationship between the demographic structure and the industrial structure of the economy. As an empirical contribution of the paper, we establish two facts using crosscountry panels; i) the hump-shaped pattern of marriage is observed in most of the OECD countries, and ii) the manufacturing share in GDP has a significant positive correlation with the prevalence of marriage. Given these observations, we propose a model of structural change with home production and endogenous household formation. In our model, individuals' incentives to marry are affected by increasing returns to marriage and on the underlying structure of the economy, which in turn depends on the evolution of sectors' productivity. Simulations show that the model is able to reproduce a timing of the hump shape of marriages consistent with that of the share of manufacturing. In addition to this, we show that the model is also able to generate a hump shape pattern of manufacturing and an acceleration of the share of services consistent with international evidence, something that the standard model of structural change fails to reproduce. * We thank Nezih Guner and José-Víctor Ríos-Rull for useful discussions and support in pursuing this project.
Using new home production data for the United States, we estimate a model of structural transform... more Using new home production data for the United States, 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, which 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 have been lower by 7.5 percent in 2010. (JEL D13, J24, L16)
We investigate the effect of structural transformation on the process of economic growth. Using a... more We investigate the effect of structural transformation on the process of economic growth. Using a two-sector growth model we show that, in addition to Baumol’s cost disease, structural transformation from goods to services generates other predictions that are in line with cross-country growth facts: an increase in the real investment rate, a decline in the real interest rate and the marginal product of capital, and an acceleration of investment-specific technological change as the share of services increases. The model calibrated to US data can account for the elasticity of real investment rates to the share of services measured in cross-country data. (JEL E22, E23, E43, L16, O33, O41, O47)
I construct a two-sector general equilibrium model to study the implications of the sectoral comp... more I construct a two-sector general equilibrium model to study the implications of the sectoral composition of GDP on cross-country di¤erences in GDP growth and volatility. Typically, high income economies grow slower, are less volatile and have a larger share of services in GDP with respect to middle income economies. I show that even when total factor productivity (TFP) growth and volatility are the same in manufacturing and services at the gross output level, the larger intensity of intermediate goods in gross output production in manufacturing implies a larger growth and volatility of TFP at the value added level in manufacturing than in services. In the model, this implies that structural change towards services induces a decline in both aggregate TFP growth and volatility, which in turn reduces GDP growth and volatility. When the model is calibrated to the U.S. manufacturing and services sectors, structural change alone is able to account for measured di¤erences in per-capita GDP growth and volatility between high and middle income economies during the 1970-2006 period. JEL Classi…cation: C67, C68, E25, E32.
This paper analyzes the Spanish monetary system from 1856, when the Bank of Spain was created, to... more This paper analyzes the Spanish monetary system from 1856, when the Bank of Spain was created, to 1874, when it was awarded the monopoly of emission. This period was characterized by the emergence of an unregulated banking system, with multiple banks of issue entitled to emit bank notes. We focus on two main issues: i) the large fl uctuations in the money supply during this period; and ii) the lack of a lender of last resort in the banking panic of 1866. To analyze this, we construct a new dataset on money supply aggregates.
In this paper, I show that the intensity through which intermediate goods are used in the product... more In this paper, I show that the intensity through which intermediate goods are used in the production process a¤ects aggregate total factor productivity (TFP). To do this,
We use a Dixit-Stiglitz setting to show that aggregate productivity fluctuations can be generated... more We use a Dixit-Stiglitz setting to show that aggregate productivity fluctuations can be generated through changes in the dispersion of firms' productivity. When the elasticity of substitution among goods is larger than one, an increase in the dispersion raises aggregate productivity because firms at the top of the distribution produce most of output. When the elasticity is smaller than one, an increase in the dispersion reduces aggregate productivity because firms at the bottom of the distribution use most of inputs. We use individual firm data from Spanish manufacturing sectors to test the relationship between the dispersion of firms' productivity and aggregate productivity. The estimated coefficients are consistent with the predictions of the model: we find that an increase in the coefficient of variation of firms productivity of 1% increases aggregate productivity by 0.59% in sectors with an elasticity of substitution larger than one while the same increase in the coefficient of variation reduces aggregate productivity by 0.07% in sectors with an elasticity of substitution smaller than one. JEL Classification: E13, E20, E30, E32.
We investigate the role of di¤erences in TFP growth between the construction sector and the gener... more We investigate the role of di¤erences in TFP growth between the construction sector and the general economy in the evolution of real housing prices. We …nd evidence of a strong positive contribution of relative TFP to housing prices in the U.S. and Germany but not in Spain and the U.K. JEL Classi…cation: E01, E23, E25, E32.
I show that an input-output production structure reinforces persistence in the pricing behavior o... more I show that an input-output production structure reinforces persistence in the pricing behavior of …rms using a Calvo mechanism. In particular, the optimal price today depends upon the expected optimal prices in the in…nite future and those set in the in…nite past. This is due to a part of a …rm's marginal cost being represented by other …rms'price. It follows that the e¤ect of the marginal cost on in ‡ation in the new Keynesian Phillips curve is dampened by the presence of the input-output structure. This helps in explaining the di¤erence between the most recent empirical evidence on price adjustment frequency in the U.S. and structural estimates of the new Keynesian Phillips curve. JEL Classi…cation: E30, E31, E39.
Biased technical change can be defined as changes that affect the elasticity of output with respe... more Biased technical change can be defined as changes that affect the elasticity of output with respect to inputs. In this paper,
Documentos de trabajo. Economic series (Universidad …, Jan 1, 2007
The share of intermediate goods in gross output has declined in the U.S. over the 1958-2004 perio... more The share of intermediate goods in gross output has declined in the U.S. over the 1958-2004 period. I present a model of gross output production in which the intermediate goods share (IGS) in gross output appears as an explicit part of total factor productivity (TFP) in the value added production function. In particular, a larger IGS implies a smaller TFP level. Therefore, the decline in the IGS can contribute to the observed TFP growth in the U.S. during the period considered. A simple growth accounting exercise shows that when the production function for gross output is Cobb-Douglas in capital, labor and intermediate goods, the IGS accounts for at least 1/4 of TFP growth. With a CES gross output production function, the IGS accounts for up to 61% of TFP growth. Using this accounting procedure, I also find that intermediate goods are responsible for the most part of the productivity slowdown occurred during the seventies.
For a single firm with a given volatility of total factor productivity at the gross output level ... more For a single firm with a given volatility of total factor productivity at the gross output level (GTFP), the volatility of total factor productivity at the value added level (YTFP) increases with the share of intermediate goods in gross output. For a Cobb-Douglas production function in capital, labor and intermediate goods, YTFP volatility is equal to GTFP volatility divided by one minus the share of intermediate goods in gross output. In the U.S., this share is steadily around 0.6 for manufacturing and 0.38 for services during the 1960-2005 period. Thus, the same level of GTFP volatility in the two sectors implies a 55% larger YTFP volatility in manufacturing. This fact contributes to the higher measured YTFP volatility in manufacturing with respect to services. It follows that, as the services share in GDP increases from 0.53 in 1960 to 0.71 in 2005 in the U.S., GDP volatility is reduced. I construct a two-sector dynamic general equilibrium input-output model to quantify the role of the structural transformation between manufacturing and services in reducing the U.S. GDP volatility. Numerical results for the calibrated model economy suggest that the structural transformation can account for 32% of the GDP volatility reduction between the 1960-1983 and the 1984-2005 periods.
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Papers by Alessio Moro