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

Kym Anderson () and Sundar Ponnusamy

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: Understanding how and why economies structurally transform as they grow is crucial for sound national policy making. Typically analysts of this issue focus on sectoral shares of GDP and employment. This paper extends that to include exports, including of services. It also considers mining in addition to agriculture and manufacturing, and recognizes some of the products of those four sectors are nontradable. The theory section’s general equilibrium model provides hypotheses about structural change in different types of economies as they grow, and tests them econometrically with annual data for a sample of 117 countries for the period 1991-2014. The results point to the futility of adopting protective policies aimed at slowing de-agriculturalization and subsequent de-industrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously governments now have far more efficient and equitable ways of supporting the adjustments needed by people choosing or being pushed to leave declining industries.

Keywords: patterns of structural change; comparative advantage; productivity growth; declining sectors (search for similar items in EconPapers)
JEL-codes: D51 E23 F11 F43 F63 N50 N60 O13 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his, nep-int and nep-mac
Date: 2018
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