This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Changes in the structure of employment will raise aggregate productivity when the marginal product of labour varies across sectors. The models in...

Using a country-industry panel dataset (EUKLEMS) we uncover a robust empirical regularity, namely that high-risk innovative sectors are relatively smaller in countries with strict employment protection legislation (EPL). To understand the mechanism, we develop a two-sector matching model where...