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Title: Sectoral Structural Change in a Knowledge Economy

Citation Type: Miscellaneous

Publication Year: 2009

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Abstract: The sectoral composition of US economy has shifted dramatically in the recent decades. At the same time, knowledge and information capital has become increasingly important in modern production process. This paper argues that a ready explanation for the recent sectoral structural change lies in the di§erence of intangible capital accumulation across sectors. In the two-sector model of the paper, as the importance of intangible capital increases, labor is shifted from direct goods production to creating sector-speciÖc intangible capital. In the process, the real output and employment shares of the high-intangible sector increase. The model generates sectoral composition change and labor productivity trend that reasonably match the data. It also shows that conventional labor productivity calculation understates the "true" productivity in sectoral goods production. The underestimation is greater for the growing sector. The empirical regressions of the paper indicate a positive and signiÖcant association between intangible capital investment intensity and Örmsí future output and employment growth. The correlation is higher for Örms in the growing sector. At the industry level, controlling for industry human capital intensity, physical capital intensity and IT investment level, intangible capital intensity is positively correlated with future industry real output and employment share growth. These Öndings are consistent with the implications of the model. The paper also presents evidence suggesting that most growing service industries are intangible capital intensive. Thus the theory developed here can also help to reconcile the expansion of the service sector and the seemingly low productivity of the sector.

Url: https://core.ac.uk/download/pdf/12022383.pdf

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Authors: Che, Natasha Xingyuan

Publisher: Georgetown University

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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