Structural change, the push-pull hypothesis and the Spanish labour market

This paper proposes a small-scale general equilibrium model of structural transformation with a non-agricultural labour market characterized by search frictions. The model is used to investigate the role of sectoral TFPs as main drivers of structural change and a new growth accounting exercise allows a quantitative reassessment of the importance of the labour reallocation bonus in structural transformation in the presence of labour market frictions. The model is calibrated to data for post-war Spain and its transition from dictatorship to democracy. Counterfactual simulations point towards productivity improvements in agriculture as the main driver, while modifications in labour market institutions affect mainly the labour market itself, with only a modest effect on structural change.