Structural Transformation in Developing Countries: Cross Regional Analysis

Structural transformation is defined as the transition of an economy from low productivity and labour-intensive economic activities to higher productivity and skill intensive activities. The driving force behind structural transformation is the change of productivity in the modern sector, which is dominated by manufacturing and services. It is also characterized by the movement of the workforce from labour-intensive activities to skill-intensive ones.

The movement of labour is severely affected by the existence of opportunities in skill-intensive sectors because, even if these opportunities exist, labour might only move to a new sector if it is properly trained to be absorbed by the sector. The existing labour force would therefore require requisite training before moving to the new sector. Empirical evidence also suggests that structural change can take place without much change in labour productivity.

The pattern of structural change observed in many African countries is a case in point. In that scenario, changes in economic structure are driven largely by the export of natural resource-based products. A study by Vries et. al. (2013) analysed structural transformation in 11 Sub-Saharan African. This study analyses the reasons for stagnant or declining productivity in”modern”sectors”on”the” African”continent.