Structural change in a small natural resource intensive economy. Switching between diversification and re-primarization

The increasing interest in economic diversification, technological sophistication and production specialization again place structural change at the centre of the analytical and empirical scene of economic development theory. However, efforts to measure structural change from a long-run perspective remain scarce. We aim to fill this gap using a synthetic indicator, based on a trigonometric approach, that represents the dynamics of structural change in the long run and allow us to identify different development patterns. We calculate this indicator including information of thirteen production sectors, for a small natural-resource intensive economy (Uruguay), over 1870-2017. Our results adequately describe the different development patterns that, according to the literature, characterize Uruguayan economic history. In the long run, economic growth causes structural change; only the First Globalization period has the opposite relation. In addition to this, the evolution of our indicator provides other interesting insights. The decline of the index –which indicates “backward movements” in the production structure– is found in periods of economic crisis and downturn cycles. This dynamic reflects critical time periods associated with the (relative) primarization of the economy. In other words, it seems evident that near to each crisis episode, the economy reacted by going back to primary production probably due to looking for traditional comparative advantages or because in such negative phases the weakest and most exposed sectors were those other than agriculture.