Economies diversify and then re-specialize as they develop. These “stages of diversification” may result from productivity-driven structural change if initially resources are concentrated in industries other than those that dominate economic structure in the long run. A calibrated multi-industry growth model with many countries and with industry differences in productivity growth rates replicates the main features of the “stages of diversification”. We also present evidence that countries systematically shift resources towards manufacturing industries with rapid productivity growth, and towards sectors with low productivity growth, consistent with the model and supporting the “productivity mechanism” for structural transformation.
Structural transformation, Stages of diversification, Productivity differences, Economic development
Economics | Industrial Organization
Review of Economic Dynamics
SAMANIEGO, Roberto and SUN, Juliana Yu.
Productivity Growth and Structural Transformation. (2016). Review of Economic Dynamics. 21, 266-285. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1707
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