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Working paper 261

Margarida Duarte and Diego Restuccia, "The Structural Transformation and Aggregate Productivity in Portugal", 2006-11-13
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Abstract: We document the substantial process of structural
transformation -the reallocation of labor between agriculture,
manufacturing, and services- and aggregate productivity growth
undergone by Portugal between 1956 and 1995. In this paper, we
assess the quantitative role of sectoral productivity in accounting
for these processes. We calibrate a model of the structural
transformation to data for the United States and use the model to
gain insight into the factors driving the structural transformation
and aggregate productivity growth in Portugal. The model implies
that Portugal features low and roughly constant relative
productivity in agriculture and services (around 22 percent) and a
modest but growing relative productivity in manufacturing (from 44
to 110 percent). We find that productivity growth in manufacturing
accounts for most of the reduction of the aggregate productivity gap
with the United States and that further substantial improvements in
relative aggregate productivity can only be accomplished via
improvements in the relative productivity of the service sector.

Keywords: productivity, structural transformation, relative sectoral productivity.

JEL Classification: O1; O4.