The S. C. Tsiang Macroeconomics Workshop: Marti Mestieri

Thursday, November 16, 2017 at 11:40am to 1:10pm

Uris Hall, 498
Central Campus

Marti Mestieri
Northwestern University & CEPR

Structural Change with Long-Run Income and Price Effects (joint w/Diego Comin & Danial Lashkari)

Abstract:  We present a new multi-sector growth model that features nonhomothetic, constant-elasticity-of-substitution preferences, and accommodates long-run demand and supply drivers of structural change. The model generates a log-linear relationship between relative sectoral demand and real income, implying non-vanishing nonhomotheticities for all income levels. The model is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing, and the rise of services over time. We estimate the demand system derived from the model using household-level data from the U.S. and India, as well as historical aggregate-level panel data for 39 countries during the postwar period. The estimated model parsimoniously accounts for the broad patterns of sectoral reallocation observed among rich, miracle and developing economies. Our estimates support the presence of strong nonhomotheticity that is stable across time, income levels, and countries. We find that income effects account for over 80% of the observed patterns of structural change.

Event Type

Class/ Workshop




EconMacro, economics, EconSeminar



Contact E-Mail

Contact Name

Amy Moesch

Contact Phone



Marti Mestieri

Speaker Affiliation

Northwestern University

Open To

Cornell Economics Community (List Serve Members)