The paper combines Baumol's model of structural change with a model of aggregate demand growth in the Keynesian-Kaleckian tradition to predict the dynamics of aggregate employment. The model for the demand regime is estimated with - and Baumol's model for the productivity regime is calibrated on...

Economic growth is driven by structural change. Structural change does not come without a cost, the most evident social cost being high and persistent unemployment. This paper develops an economy with an endogenously expanding service sector, where the constant flow of workers in and out of...