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Essays on Multi-sector Labor Allocations and Growth Open Access

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This dissertation consists of three essays on labor allocations and growth in sector activities. The first essay categorizes the US economy into nondurable and durable sectors and studies the business cycle comovement in the two sectors. The second essay focuses on driving forces behind the composition shifts in three sectors of the US economy--goods-producing, distributive services and other services. The third essay particularly emphasizes on the distribution sector, which is a cross country empirical study on growth patterns in distributive services.The first essay analyzes a two-sector business cycle model to reconcile the so-called ``comovement puzzle". While empirical evidence indicates positive comovement among sectors in terms of employment and investment, the standard real business cycle model has counterfactual implications when it is extended to two sectors (durable vs. nondurable). The extended two-sector model implies that labor and capital shift from the nondurable sector to the durable sector during economic booms. This paper provides a solution to the ``comovement puzzle" by introducing labor adjustment costs, while retaining standard features in real business cycle models. The minorly modified model is able to generate positive comovement in sectoral hours, investment and output consistent with data observations, and in addition, produce aggregate business cycle properties as well as the standard real business cycle model.The second essay identifies drivers behind the composition shifts among US sectors in terms of nominal value added and employment shares. In particular, there has been a rapid decline in goods-producing industries, a slight decline in distributive services, and a significant rise in other services in the past two decades. There are two main drivers for the above shifts. On the labor supply side, rapid productivity growth in goods-producing and distributive services pushes labor into other services sector because final goods consumption (produced by manufactured goods and distributive services) and final services consumption (produced by other services) are complementary. On the labor demand side, higher productivity in the distribution sector relative to the goods-producing sector motivates goods-producers to substitute towards professional distribution and away from in-house production of distributive services. The two opposing effects consequently lead to only a mild decrease in shares of output and employment in the distribution sector.The third essay examines growth patterns in distributive services during the course of development. Using a panel of 183 countries over the period 1980-2010 from UNSTAT database, I find that the share of output in distributive services has an inverted U-shape pattern with respect to the level of per capita income. Distributive services initially rise with per capita income, but eventually decline when per capita income reaches a relatively high level. The inverted U-shape is supported in many advanced countries that have experienced a declining share of output in distributive services in the past few decades.

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