School of Economics

2019 Discussion papers

School of Economics Discussion Paper 19/01

Engines of Sectoral Labor Productivity

Zsófia L. Bárány, Sciences Po and CEPR
Christian Siegel, University of Kent

March 2019


We study the origins of labor productivity growth and its differences across sectors. In our model, sectors employ workers of different occupations and various forms of capital, none of which are perfect substitutes, and technology evolves at the sector-factor cell level. Using the model we infer technologies from US data over 1960-2017. We find sector-specific routine labor augmenting technological change to be crucial. It is the most important driver of sectoral differences, and has a large and increasing contribution to aggregate labor productivity growth. Neither capital accumulation nor the occupational employment structure within sectors explains much of the sectoral differences.

JEL Classification: O41; O33; J24

Keywords: biased technological change; structural transformation; labor productivity

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Last Updated: 03/04/2019