Prioritising Interventions for Sustainable Structural Transformation in Africa: A Structural Equation Modelling Approach

Abstract

Development paradigms offer competing theories on the drivers of structural transformation. Most of the analysis has so far focused on the economic factors with little emphasis placed on either the social or environmental dimensions of sustainable development. Furthermore, there has been little theoretical or empirical analysis of how the three dimensions (e.g., economic, social, and environmental) interact to impact on structural transformation. This leaves an important gap in the literature since the three sectors are interlinked, not mutually exclusive, and hence cannot be analysed in isolation from one another. Using a panel data set for a group of 29 African countries spanning the period 1995-2011, this study employs a structural equation modelling approach to estimate the direct and indirect impacts of social, economic and environmental indicators on a composite index of structural transformation. We find that strategies that prioritise investments in social inclusion programmes have the greatest catalytic effect in advancing structural transformation in Africa.

Keywords: structural transformation, sustainable development, structural equation modelling, Africa, development planning

JEL Classification: C3, L16, O55, Q01