Eberhardt, MarkusTeal, Francis2013-01-252013-01-252013-01https://hdl.handle.net/10986/12157One of the most striking features of economic growth is the process of structural change whereby the share of agriculture in GDP decreases as countries develop. The cross-country growth literature typically estimates an aggregate homogeneous production function or convergence regression model that abstracts from this process of structural change. This paper investigates the extent to which assumptions about aggregation and homogeneity matter for inferences regarding the nature of technology differences across countries. Using a unique World Bank dataset, it estimates production functions for agriculture and manufacturing in a panel of 40 developing and developed countries for the period from 1963 to 1992. It empirically models dimensions of heterogeneity across countries, allowing for different choices of technology within both sectors. The paper argues that heterogeneity is important within sectors across countries implying that an analysis of aggregate data will not produce useful measures of the nature of the technology or productivity. It shows that many of the puzzling elements in aggregate cross-country empirics can be explained by inappropriate aggregation across heterogeneous sectors.CC BY 3.0 IGOAGGREGATE FUNCTIONSAGGREGATE PRODUCTION FUNCTIONAGRICULTUREAPPROPRIATE TECHNOLOGYAVAILABILITY OF DATABANDWIDTHBASE YEARBENCHMARKBIBIASESBUSINESS CYCLESCAPACITY BUILDINGCAPITAL STOCKCAPITAL-LABORCAPITAL-LABOR RATIOSCDCOINTEGRATIONCOMMON DENOMINATORCONFIDENCE INTERVALSCONSTANT RETURNSCONSTANT RETURNS TO SCALECULTURAL CHANGEDATA ANALYSISDATA LIMITATIONSDATA SOURCESDECREASING RETURNSDEFLATIONDEFLATORSDESCRIPTIVE STATISTICSDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDIFFUSION INDEXESDUAL ECONOMYECONOMETRIC MODELINGECONOMETRICSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC HISTORYECONOMIC PERFORMANCEECONOMIC STATISTICSECONOMIC SURVEYSECONOMIC THEORYELASTICITYEMPIRICAL METHODSEQUATIONSEXCHANGE RATEEXCHANGE RATESEXTERNALITIESFACTOR ACCUMULATIONFACTOR ANALYSISFACTOR DEMANDFINANCIAL CRISISGDPGDP PER CAPITAGLOBALIZATIONGROWTH ACCOUNTINGGROWTH ANALYSISGROWTH LITERATUREGROWTH MODELGROWTH MODELSGROWTH RATEGROWTH RATESGROWTH REGRESSIONSHUMAN CAPITALHYPOTHESESIMPLEMENTATIONSINCOME PER CAPITAINCREASING RETURNSINCREASING RETURNS TO SCALEINDEPENDENT VARIABLESINDUSTRIALIZATIONINNOVATIONINSTRUMENTAL VARIABLESINTERNATIONAL COMPARISONSINTERNATIONAL INVESTMENTINVENTORYLABOR FORCELESS DEVELOPED COUNTRIESLINEAR REGRESSIONLOGARITHMSLOW INTEREST RATEMACROECONOMIC FORECASTINGMACROECONOMICSMANUFACTURINGMATRIXNATIONAL INCOMENATURAL RESOURCESONLINE DATABASEOPEN ACCESSOUTLIERSOUTPUT STRUCTUREPOLITICAL ECONOMYPRIVATE SECTORPRODUCTION FUNCTIONPRODUCTION FUNCTIONSPRODUCTION PROCESSPRODUCTIVITYPRODUCTIVITY GROWTHPURCHASING POWERPURCHASING POWER PARITYR&DRANDOM WALKSREAL GDPRESULTRESULTSRETURNS TO SCALESIMULTANEOUS EQUATIONSSTANDARD ERRORSSTATASTRUCTURAL CHANGETECHNICAL PROGRESSTECHNOLOGICAL PROGRESSTFPTIME PERIODTIME PERIODSTIME SERIESTOTAL FACTOR PRODUCTIVITYTRANSMISSIONUNDUE INFLUENCEUSESVALIDITYVALUE ADDEDVARIABILITYWEALTHWEBWorld Bank10.1596/1813-9450-6335