Structural change and economic development

This dissertation emphasizes three aspects of structural change in economic development. Structural change is the process by which the distribution of economic output shifts from one sector to another and is crucial to understanding overall economic growth. The first chapter demonstrates that property rights and the relative value of land in rural credit markets have significant implications for the rate and level of economic development. When borrowers have little net worth, access to credit is limited and the transition from agriculture to industry proceeds at a slower rate. A quantitative model provides estimates of the welfare cost of such frictions. The second chapter argues that differential costs of technology adoption across developing countries can explain the failure of some import-substitution strategies. An analytical model demonstrates the importance of such adoption costs, and an empirical section finds evidence in support of it. The primary result is that import-substituting policies aimed at rapid industrialization may in fact inhibit economic growth, explaining why some countries have experienced lower rates of economic development. The third chapter uses a robust econometric procedure to estimate sector-specific productivity growth for a sample of OECD countries. It finds that the sources of productivity growth vary widely across countries. Productivity growth is not concentrated in industrial sectors alone but can also result from advances in service sectors.