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

  • Xinshen Diao
  • Margaret McMillan
  • Dani RodrikEmail author


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.


Economic growth Structural transformation Economic development 



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.


  1. Aghion, P., & Howitt, P. (1992). A model of growth through creative destruction. Econometrica, 60(2), 323–351.CrossRefGoogle Scholar
  2. de Vries, G. J., Timmer, M. P., & de Vries, K. (2015). Structural transformation in Africa: Static gains, dynamic losses. The Journal of Development Studies, 51(6), 674–688.CrossRefGoogle Scholar
  3. Diao, X., Harttgen, K., & McMillan, M. (2017). The changing structure of Africa’s economies. World Bank Economic Review, 31(2), 412–433. Scholar
  4. Duarte, M., & Restuccia, D. (2010). The role of the structural transformation in aggregate productivity. Quarterly Journal of Economics, 125(1), 129–173.CrossRefGoogle Scholar
  5. Gollin, D., Lagakos, D., & Waugh, M. E. (2014). The agricultural productivity gap. Quarterly Journal of Economics, 129(2), 939–993.CrossRefGoogle Scholar
  6. Grossman, G. M., & Helpman, E. (1991). Innovation and growth in the global economy. Cambridge, MA: The MIT Press.Google Scholar
  7. Hausmann, R., Pritchett, L., & Rodrik, D. (2005). Growth accelerations. Journal of Economic Growth, 10(4), 303–329.CrossRefGoogle Scholar
  8. Jones, B. F., & Olken, B. A. (2008). The anatomy of start-stop growth. Review of Economics and Statistics, 90(3), 582–587.CrossRefGoogle Scholar
  9. Klasen, S., & Blades, D. (2013). Special issue: Measuring income, wealth, inequality, and poverty in sub Saharan Africa: Challenges, issues, and findings. Review of Income and Wealth, 59(s1), S1–S200.CrossRefGoogle Scholar
  10. Kuznets, S. (1955). Economic growth and income inequality. American Economic Review, 45(March), 1–28.Google Scholar
  11. Lewis, A. W. (1954). Economic development with unlimited supplies of labor. The Manchester School, 22, 139–191.CrossRefGoogle Scholar
  12. Matsuyama, K. (1992). Agricultural productivity, comparative advantage, and economic growth. Journal of Economic Theory, 58, 317–334.CrossRefGoogle Scholar
  13. McCullough, E. B. (2015). Labor productivity and employment gaps in sub-Saharan Africa. In World Bank policy research working paper 7234. Washington, DC: World Bank.Google Scholar
  14. McMillan, M., & Rodrik, D. (2011). Globalization, structural change, and productivity growth. NBER Working Paper 17143. Cambridge, MA: National Bureau of Economic Research.Google Scholar
  15. McMillan, M., Rodrik, D., & Sepulveda, C. (2017). Structural change, fundamentals, and growth: A framework and country studies. Washington, DC: International Food Policy Research Institute (forthcoming).Google Scholar
  16. Mundlak, Y., Butzer, R., & Larson, D. F. (2012). Heterogeneous technology and panel data: The case of the agricultural production function. Journal of Development Economics, 99(1), 139–149.CrossRefGoogle Scholar
  17. Ocampo, J. A., Rada, C., & Taylor, L. (2009). Growth policy in developing countries: A structuralist approach. New York: Columbia University Press.CrossRefGoogle Scholar
  18. Prebisch, R. (1950). The economic development of Latin America and its principal problems. Economic Commission for Latin America. New York: United Nations Department of Economic Affairs, Lake Success.Google Scholar
  19. Rodrik, D. (2014). The past, present, and future of economic growth. In Franklin Allen and others, Towards a better global economy: Policy implications for citizens worldwide in the 21st century. Oxford/New York: Oxford University Press.CrossRefGoogle Scholar
  20. Rodrik, D. (2016, March). Premature deindustrialization. Journal of Economic Growth, 21(1), 1–33.CrossRefGoogle Scholar
  21. Singer, H. W. (1950, May). The distribution of gains between investing and borrowing countries. The American Economic Review, 40(2), 473–485.Google Scholar
  22. Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94.CrossRefGoogle Scholar
  23. Timmer, M. P., & de Vries, G. J. (2007). A cross-country database for sectoral employment and productivity in Asia and Latin America, 1950–2005. Groningen growth and development centre research memorandum 98. Groningen: University of Groningen.Google Scholar
  24. Timmer, M. P., & de Vries, G. J. (2009). Structural change and growth accelerations in Asia and Latin America: A new Sectoral data set. Cliometrica, 3(2), 165–190.CrossRefGoogle Scholar
  25. Timmer, M. P., de Vries, G. J., & de Vries, K. (2015). Patterns of structural change in developing countries. In J. Weiss & M. Tribe (Eds.), Routledge handbook of industry and development (pp. 65–83). London: Routledge.Google Scholar
  26. Wei, S., & Zhang, X. (2011). Sex ratios, entrepreneurship and economic growth in the People’s Republic of China. NBER Working Paper 16800. Cambridge, MA: National Bureau of Economic Research.Google Scholar
  27. World Bank. (2017). World development indicators. Download of dataset from Accessed 6 Jan 2017.

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

Personalised recommendations