Structural Transformation to Manufacturing and Services: What Role for Trade?

Asian Development Review 36:2

40 Pages Posted: 19 Sep 2019

See all articles by Kym Anderson

Kym Anderson

University of Adelaide - Centre for International Economic Studies (CIES); Centre for Economic Policy Research (CEPR); Australian National University

Sundar Ponnusamy

University of Adelaide

Multiple version iconThere are 2 versions of this paper

Date Written: September 10, 2019

Abstract

Understanding how and why economies structurally transform as they grow is crucial for making sound national policy decisions. Typically, analysts who study this issue focus on sectoral shares of gross domestic product and employment. This paper extends those studies to include exports, including exports of services. It also considers mining, in addition to agriculture and manufacturing, and recognizes that some of the products of these four sectors are nontradable. The section on theory presents a general equilibrium model that provides hypotheses about structural change in different types of economies as they grow. These are then tested econometrically with annual data for the period 1991–2014 for a sample of 117 countries. The results point to the futility of adopting protective policies aimed at slowing deagriculturalization and subsequent deindustrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously, governments now have more efficient and equitable ways of supporting adjustments needed by people who choose or are forced to leave declining industries.

Keywords: comparative advantage, declining sectors, patterns of structural change, productivity growth

JEL Classification: F11, F43, F63, N50, O14

Suggested Citation

Anderson, Kym and Ponnusamy, Sundar, Structural Transformation to Manufacturing and Services: What Role for Trade? (September 10, 2019). Asian Development Review 36:2, Available at SSRN: https://ssrn.com/abstract=3451543

Kym Anderson (Contact Author)

University of Adelaide - Centre for International Economic Studies (CIES) ( email )

School of Economics
Adelaide SA 5005
Australia
+61 8 8313 4712 (Phone)
+61 8 8223 1460 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University ( email )

Arndt-Corden Dept of Economics
Coombs Building
Canberra, AK ACT 2600
Australia
+61 8 8313 4712 (Phone)

HOME PAGE: http://publicpolicy.anu.edu.au/crawford_people/content/staff/acde/kanderson.php

Sundar Ponnusamy

University of Adelaide ( email )

North Terrace
Adelaide, South Australia 5000
Australia

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