Structural transformation to manufacturing and services: What role for trade?

Kym Anderson*, Sundar Ponnusamy

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

Understanding how and why economies structurally transform as they grow is crucial for making sound national policy decisions. Typically, analysts who study this issue focus on sectoral shares of gross domestic product and employment. This paper extends those studies to include exports, including exports of services. It also considers mining, in addition to agriculture and manufacturing, and recognizes that some of the products of these four sectors are nontradable. The section on theory presents a general equilibrium model that provides hypotheses about structural change in different types of economies as they grow. These are then tested econometrically with annual data for the period 1991–2014 for a sample of 117 countries. The results point to the futility of adopting protective policies aimed at slowing deagriculturalization and subsequent deindustrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously, governments now have more efficient and equitable ways of supporting adjustments needed by people who choose or are forced to leave declining industries.

Original languageEnglish
Pages (from-to)32-71
Number of pages40
JournalAsian Development Review
Volume36
Issue number2
DOIs
Publication statusPublished - 2019
Externally publishedYes

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