Development perspectives - Structural transformation

Question 1

what is structural transformation

Answer 1

• changes in the composition of an economy as it evolves from a primary agricultural state to a modern industrialized one

Question 2

what is the structural transformation transition from

Answer 2

• the transition from an economy of low productivity and labour intensive economic activities
• to higher productivity and skill intensive activities

Question 3

what is the driving force behind structural transformation

Answer 3

• increased productivity
  dominated by manufacturing

Question 4

what is the link between structural transformation and development?

Answer 4

• all countries that have developed have seen change from labour intensive to skill intensive activities
• does this mean the transition leads to growth?

Question 5

what is graphical evidence
- structural transformation leads to growth

Answer 5

• negative correlation across and within countries between share of employment in agriculture and GDP per capita
• richer countries = low share of agriculture
• as a particular country gets richer = share of agriculture falls

Question 6

what model is used to explain how structural transformation can occur

Answer 6

the lewis model

Question 7

what does the lewis model show

Answer 7

how can countries that are initially 100% agricultural start developing

Question 8

explain how the Lewis model works

Answer 8

1. agriculture + industrial sector
2. phase 1 - people move out of agriculture and to industrial (agricultural labour surplus) = absorbed by industrial because of increased demand for new labour from technological advancement of reinvested profits
   - get wage that will allow them to buy same basket of goods as agri
3. phase 2 - people leaving agri cause Q to decrease and agri P to increase = so industrial workers need to be paid higher wage
   - to be compensated workers need to buy a mix of industrial and agricultural goods = which is only possible if w- is far enough from subsistence level - otherwise no industrial good can compensate loss of agri good

• can only absorb the agricultural surplus if technological change keeps shifting labour demand to the right

Question 9

what does the fact that
GDP per capita is growing everywhere since 1990s (also for SSA)
and all regions have shown decrease in share of agri

have to do with anything

Answer 9

• does this mean that structural transformation is necessary for economic development
• decreasing share of agri = growth?

Question 10

what is the relationship between share of manufacturing and GDP

• clear negative relationship between agri and GDP

Answer 10

• characteristic of most economic takeoffs = decrease agri share + increase manufacturing
• not the case for africa - has increased economic growth, reduce share in agri, but falling share in manufacturing
• unlike south korea = manufacturing increased

Question 11

does manufacturing play an important role in economic takeoff of other countries

Rodrick 2013

Answer 11

• manufacturing exhibits unconditional convergence in productivity
• no matter the initial conditions
• but service industry doesnt exhibit unconditional convergence

Question 12

why is manufacturing exhibiting unconditional convergence a good thing

what is unconditional convergence

Answer 12

• tendency for poorer countries to catch up with richer in terms of GDP per capita over time regardless of initial conditions
• manufacturing drives unconditional convergence
• manufacturing = technological progress and efficiency gains - contribute to economic growth

Question 13

what is Rodricks main point

Answer 13

• manufacturing exhibits unconditional convergence in productivity
• no matter the initial conditions - productivity in manufacturing converges to the global productivity frontier
• manufacturing increases producivity
• manufacturing can lift countries out of poverty

Question 14

why does manufacturing exhibit unconditional convergence and not services

Answer 14

• works for formal manufacturing produce
• manufacturing absorbs a lot of people - all levels of skills
• technology transfer = manufacturing can let people skill up
• services cant skill up

Question 15

how has Africa experienced early deindustrialisation?

Answer 15

• services have absorbed large part of shift
• agriculture share decreased
• urbanisation increased
• services no evidence of unconditional convergence

Question 16

if structural transformation has not driven growth in africa what has?

Answer 16

• commodity price boom 2000-2016
• high demand driven by China for energy, agriculture, metals
• is this sustainable growth
• shrinking demand from china now