Structural Transformation in Southeast Asian Countries and Key Drivers

IFPRI Discussion Paper 1856

45 Pages Posted: 13 Aug 2019

See all articles by Seema Bathla

Seema Bathla

School of Social Sciences, Jawaharlal Nehru University

Alwin D’Souza

Arizona State University (ASU), W.P. Carey School of Business

P. K. Joshi

International Food Policy Research Institute (IFPRI)

Date Written: August 3, 2019

Abstract

This study’s objective is to examine the factors that have driven structural transformation (ST) in the Southeast Asian (SEA) economies and the policies supporting the process. It sets the stage by evaluating the ST in each country, quantifying the contribution of “within sector” and “structural change” to overall productivity growth and estimating the turning points (TPs) to gauge the prospects of income convergence. Eight SEA countries, undergoing a steady rate of economic growth — Cambodia, Lao PDR, Myanmar, Viet Nam, Philippines, Malaysia, Indonesia, and Thailand (CLMVPMIT) are chosen for analysis. We find their progress on ST to be consistent with the theory and historical patterns experienced in several developed and developing countries. However, progress is diverse across these countries and lags behind developed countries, indicating that labor is not exiting agriculture as fast as agriculture’s share of value added has been declining. The ST has decreased from 49 percent in Thailand to almost 3 percent each in Cambodia and Malaysia during 1991 to 2016. Further, the contribution of within change to productivity, which was pivotal during the 1990s in each country is rather subdued during the 2000s, thereby giving comparative primacy to structural change. A relatively higher — 57 to 80 percent — contribution of structural change in Cambodia and Lao PDR, together with productivity growth, may be explained by increasing migration and trade in nonagriculture products. We also find that while Lao PDR, Thailand, and Indonesia have reached their TPs, other nations, especially the poorer ones such as Viet Nam, Myanmar, and Philippines are predicted to take at least a decade towards this goal. Empirical analysis suggests ST in CLMVPMIT is positively driven by agricultural productivity, terms of trade, and public investments in infrastructure, with little role for rural to urban migration and market integration. Large inter-sectoral productivity differentials across SEA countries, other than in Cambodia and Malaysia, necessitates to accelerate agricultural disproportionate share of the labor force in agriculture through higher productivity.

Keywords: agricultural productivity, labour productivity, policies, land productivity, productivity

Suggested Citation

Bathla, Seema and D’Souza, Alwin and Joshi, Pramod Kumar, Structural Transformation in Southeast Asian Countries and Key Drivers (August 3, 2019). IFPRI Discussion Paper 1856, Available at SSRN: https://ssrn.com/abstract=3429994

Seema Bathla (Contact Author)

School of Social Sciences, Jawaharlal Nehru University ( email )

Vasant Vihar
Jawaharlal Nehru University
New Delhi, DE Delhi 110067
India

Alwin D’Souza

Arizona State University (ASU), W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

Pramod Kumar Joshi

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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