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International Monetary Fund. Communications Department

Abstract

IMF Managing Director Christine Lagarde delivered this address at Guildhall as part of the World Traders’ Tacitus Lecture series in London on February 28, 2019.

Mr. Sergio Rebelo, Ms. Piyabha Kongsamut, and Danyang Xie
Balanced growth models are commonly used in macroeconomics because they are consistent with the well-known Kaldor facts regarding economic growth. These models, however, are inconsistent with one of the most striking regularities of the growth process—the massive reallocation of labor from agriculture into manufacturing and services. This paper presents a simple model consistent with both the Kaldor facts and the dynamics of sectoral labor reallocation. The model shows that balanced growth can be consistent with structural change.