Conformism and Structural Change

We study structural change in a simple, two-sector endogenous growth model and showthat the presence of commodity-specific consumption externalities can be a source ofstructural change. When the degrees of consumption externalities are dierent betweendierent goods, the two sectors grow at dierent rates, whereas the aggregateeconomy exhibits balanced growth in the sense that capital stock and expenditure growat the same constant rate. Under the more restrictive condition such that the degrees ofconsumption externalities are the same, structural change does not occur. We also showthat the dependence of the benchmark consumption levels on the past consumption iscrucial for the divergent patterns of structural change across countries