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Structural Transformation around the World: Patterns and Drivers

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  • Kunal Sen

    (Director, United Nations University World Institute for Development Economics Research (UNU-WIDER). Author-email: sen@wider.unu.edu)

Abstract

The conventional view of structural transformation is informed by three stylized facts of economic development: (i) all economies exhibit declining employment in agriculture, (ii) all economies exhibit a hump-shaped share of employment in industry, and (iii) all economies exhibit an increasing share of employment in services. In this paper, I show that this presumed path of structural transformation may no longer be the route to economic development in low-income economies. Classifying economies as either structurally developed, structurally developing, or structurally underdeveloped, I observe a different path of structural transformation in structurally underdeveloped economies in which workers are moving directly from agriculture to nonbusiness services, which as a sector does not have the same productivity gains as manufacturing. I also show that the mainstream approach is unable to explain the patterns of structural transformation observed in low-income developing economies. This suggests the need to rethink the theoretical premises behind much of the mainstream approach to structural transformation and to identify alternate causal mechanisms to explain the different types of structural transformation underway in the developing world.

Suggested Citation

  • Kunal Sen, 2019. "Structural Transformation around the World: Patterns and Drivers," Asian Development Review, MIT Press, vol. 36(2), pages 1-31, September.
    • Handle: RePEc:tpr:adbadr:v:36:y:2019:i:2:p:1-31
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    References listed on IDEAS

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    9. Çinar Baymul & Kunal Sen, 2019. "Kuznets Revisited: What Do We Know about the Relationship between Structural Transformation and Inequality?," Asian Development Review, MIT Press, vol. 36(1), pages 136-167, March.
    10. Amrit Amirapu and Arvind Subramanian, 2015. "Manufacturing or Services? An Indian Illustration of a Development Dilemma - Working Paper 409," Working Papers 409, Center for Global Development.
    11. Haraguchi, Nobuya & Cheng, Charles Fang Chin & Smeets, Eveline, 2017. "The Importance of Manufacturing in Economic Development: Has This Changed?," World Development, Elsevier, vol. 93(C), pages 293-315.
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    5. Musungu, Arnold L. & Kubik, Zaneta & Qaim, Matin, 2023. "Drought Shocks and Labor Reallocation in Rural Africa: Evidence from Ethiopia," Discussion Papers 338675, University of Bonn, Center for Development Research (ZEF).
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    7. Hagen Kruse & Emmanuel Mensah & Kunal Sen & Gaaitzen Vries, 2023. "A Manufacturing (Re)Naissance? Industrialization in the Developing World," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 439-473, June.
    8. Kyunghoon Kim & Arriya Mungsunti & Andy Sumner & Arief Anshory Yusuf, 2020. "Structural transformation and inclusive growth: Kuznets' 'developer's dilemma' in Indonesia," WIDER Working Paper Series wp-2020-31, World Institute for Development Economic Research (UNU-WIDER).
    9. Hossain, Marup & Mullally, Conner & Mabiso, Athur, 2024. "Occupational and asset adjustments in Tamil Nadu, India: The role of a finance and rebuilding program," World Development, Elsevier, vol. 177(C).
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    11. Durongkaveroj, Wannaphong, 2022. "Structural Transformation, Income Inequality and Government Expenditure: Evidence from International Panel Data," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 29-44.
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    More about this item

    Keywords

    deindustrialization; employment; productivity; structural transformation;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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