Economic growth and restructuring: a test of unbalanced growth models - 1977-1992

A model adapted from Baumol (American Economic Review, 57, 1967, 415-26) is used to establish the determinants of growth in per capita commercial serv ice sector output and this service sector's share of employment, based on t he experience of Canada, the US, France and Germany. Parameter estimates ob tained from the OECD data, for the period 1977-92, are used within the mode l framework to predict the output and employment dimensions of economic res tructuring and growth. A comparison of model predictions with observations suggests the model can explain most of the observed service sector output g rowth, but it has less success explaining growth in employment shares. Thes e results illustrate the difficulties of confronting the performance of sim ple models with empirical evidence and the challenge that remains in discov ering additional explanations of economic restructuring.