The Recent Growth Boom in Developing Economies: A Structural Change Perspective

62 Pages Posted: 7 Feb 2017

See all articles by Xinshen Diao

Xinshen Diao

International Food Policy Research Institute (IFPRI)

Margaret McMillan

Tufts University - Department of Economics; International Food Policy Research Institute (IFPRI); National Bureau of Economic Research (NBER)

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2017

Abstract

Growth has accelerated in a wide range of developing countries over the last couple of decades, resulting in an extraordinary period of convergence with the advanced economies. We analyze this experience from the lens of structural change – the reallocation of labor from low- to high-productivity sectors. Patterns of structural change differ greatly in the recent growth experience. In contrast to the East Asian experience, none of the recent growth accelerations in Latin America, Africa, or South Asia was driven by rapid industrialization. Beyond that, we document that recent growth accelerations were based on either rapid within-sector labor productivity growth (Latin America) or growth-increasing structural change (Africa), but rarely both at the same time. The African experience is particularly intriguing, as growth-enhancing structural change appears to have come typically at the expense of declining labor productivity growth in the more modern sectors of the economy. We explain this anomaly by arguing that the forces that promoted structural change in Africa originated on the demand side, through either external transfers or increase in agricultural incomes. In contrast to Asia, structural change was the result of increased demand for goods and services produced in the modern sectors of the economy rather than productivity improvements in these sectors.

Suggested Citation

Diao, Xinshen and McMillan, Margaret and Rodrik, Dani, The Recent Growth Boom in Developing Economies: A Structural Change Perspective (February 2017). NBER Working Paper No. w23132. Available at SSRN: https://ssrn.com/abstract=2912105

Xinshen Diao (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

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Margaret McMillan

Tufts University - Department of Economics ( email )

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International Food Policy Research Institute (IFPRI) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Dani Rodrik

Harvard University - Harvard Kennedy School (HKS) ( email )

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HOME PAGE: http://www.ksg.harvard.edu/rodrik/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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