Working Paper 258 - Structural Transformation: A competitiveness-based view

Christian Ketels

Working Paper Series from African Development Bank

Abstract: Competitiveness has been proposed as an integrated framework to understand the drivers of prosperity differences across locations (Porter, 1990). This chapter outlines key elements of the competitiveness framework and relates them to the idea of structural transformation (Lin, 2016, 2012). What emerges are significant similarities and complementarities between the two, as well as other related work on new industrial policy, economic complexity, evolutionary economic geography and innovation systems. All of these approaches share a granular and often sector-specific perspective onmicroeconomic structures and systems, moving beyond macroeconomic, economy-wide, or single factor microeconomic explanations of prosperity and development.But there are also meaningful differences with significant policy implications: the competitiveness literature views sectoral composition as a largely endogenous part of development, while the structural transformation literature frames it as a fundamental driver of development. The competitiveness literature argues for a focus on upgrading competitiveness fundamentals in a highly context-specific way, using all existing clusters of related industries as platforms to inform and mobilize action to upgrade competitiveness. The structural transformation literature suggests pushingthe development of specific industries perceived to have more development potential, using industry specific interventions downside risk aversion. This underscores the need to account for farmers’ preferences towards higher order moments when designing technology adoption policies

Date: 2017-05-17
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