Dualism and cross-country growth regressions

This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Changes in the structure of employment will raise aggregate productivity when the marginal product of labour varies across sectors. The models in the paper incorporate this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and indicate that the reallocation of labour makes a significant contribution to the international variation in productivity growth.