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

  • Xinshen Diao
  • Margaret McMillan
  • Dani RodrikEmail author
Chapter

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.

Keywords

Economic growth Structural transformation Economic development 

Notes

Acknowledgments

We acknowledge Peixun Fang for excellent research assistance. Diao and McMillan gratefully acknowledge the support of the CGIAR’s research program Policies, Institutions and Markets (PIM) led by the International Food Policy Research Institute. We also thank Jose Antonio Ocampo for helpful comments.

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Development Strategy and GovernanceInternational Food Policy Research Institute (IFPRI)Washington, DCUSA
  2. 2.Tufts University and IFPRIMedford, SomervilleUSA
  3. 3.John F. Kennedy School of GovernmentHarvard UniversityCambridgeUSA

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