Business Cycle during Structural Change: Arthur Lewis’ Theory from a Neoclassical Perspective
Time：10:30am - 12pm, June 17, 2019
Venue：Room 359S, Overseas Exchange Center, Peking University
(Professor of Macroeconomics at University of Oslo )
We document that the nature of business cycles evolves over the process of development and structural change. In countries with large declining agricultural sectors, aggregate employment is uncorrelated with GDP. During booms, employment in agriculture declines while labor productivity increases in agriculture more than in other sectors. We construct a unified theory of business cycles and structural change consistent with the stylized facts. The focal point of the theory is the simultaneous decline and modernization of agriculture. As capital accumulates, agriculture becomes increasingly capital intensive as modern agriculture crowds out traditional agriculture. Structural change accelerates in booms and slows down in recessions. We estimate the model and show that it accounts well for both the structural transformation and the business cycle fluctuations of China.
Kjetil Storesletten is a Professor of Macroeconomics at University of Oslo. He obtained his PhD at Carnegie Mellon University in 1995. He has been a Monetary Advisor at Minneapolis Fed and an Associate Professor at Stockholm University (IIES). He is President Elect of the European Economic Association. He is a joint recipient of the Sun Yefang 2012 Award from the Chinese Academy of Social Sciences (prize granted for the paper “Growing Like China”). He is a former managing editor (2006-10) of the Review of Economic Studies, and is currently the Chairman of this journal. He is the Principal Investigator of an ERC Advanced Grant. He is a Fellow of the Econometric Society, EEA, and CEPR. His research interests include macroeconomics, political economy, asset pricing, and the economic development of China. He has published papers in several top journals, including, among others: American Economic Review, Econometrica, Journal of Political Economy.