Decomposing regional growth: Labor force participation rates, structural changes, and sectoral factor reallocation

Abstract

Most studies on convergence analyze the dynamics of per capita income, instead of the theoretically more appropriate product per worker (PPW). This study deals with the latter, providing information on the dynamics of the production of spatial units (countries or regions), net of the dynamics of labor force participation rates. It also assesses the contribution of different sectors to economic growth dynamics, stressing the role of sectoral structure changes to the dynamics of PPW, bringing into the convergence debate some ideas from the economic development literature. Thirdly, the possible influence to economic growth of factor reallocation among sectors is analyzed. Empirical evidence for the case of Brazilian states is offered.