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Appendix I. Calibration Details
Rowthorn and Ramaswamy (1999) estimate that once the per capita level for wealth hits roughly $9000, deindustrialization commences.
Early contributions to this explanation include Fisher (1935) and Clark (1940). More recent contributions such as Freeman and Schettkat (2001, 2005) focus on the “marketization” of household production as the key factor underlying the income elasticity of service demand.
Commodities were defined to be agriculture, fishing, forestry, mining and the production of food and beverages. Food and beverages were not included in commodities for South Africa, the U.K. or the U.S.
Nordhaus (2008) using an industry data set for the United States covering 1948-2001 period finds strong evidence of unbalanced growth as well substantial support for the implications of Baumol’ unbalanced growth theory.
These productivity growth rates are derived from the data that supports the CGER assessment of exchange rates which is maintained by the IMF’s Research Department. See IMF (2006).
Although empirical support for service demand being income elastic is mixed, as reported in Falvey and Gemmel (1996), Schettkat (2007) argues that careful analysis of input-output data, National Accounts data, and household expenditure surveys, suggests that service demand is income elastic, particularly household expenditure.
Computed as 1.95/3.26 for New Zealand, 1.52/2.68 for Australia, and 0.95/2.89 for the United States.