Sectoral growth accounting and structural change in post-war Europe

Abstract

Introduction The role of sectoral performance in economic growth has been a topic of major importance in growth studies from Adam Smith and David Ricardo onwards. Some scholars claimed that the shift of employment from low productivity to high productivity sectors was one of the main factors behind the overall rise in productivity. For example, ‘structural change’ was seen by Kuznets (1966) as one of the major ‘stylized facts’ of growth, although in his view it was more encompassing than only changes in sectoral shares of employment and output. Chenery et al , (1986) defined structural transformation as ‘the set of changes in the composition of demand, trade, production, and factor use that takes place as per capita income increases’ (pp. 31–2). An alleged need for structural change is also mentioned frequently as a motive behind the promotion of European economic integration. According to its supporters, liberalization of trade relations and greater mobility of factor resources between member countries of the European Union is assumed to enhance structural change, with a positive effect on the growth of GDP and productivity. To provide empirical evidence of the effect of sectoral change on economic growth during the post-war period, this chapter analyses estimates of empirical evidence on growth and levels of output and productivity by sector of the economy.

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