By Taylor Jaworski, Queen’s University
Structural transformation is the long-run process that moves workers (and the output they produce) from agriculture to the manufacturing or service sectors. Empirically, this process is characterized by a declining share of employment (and output) in agriculture as income per capita rises. The flip side of the transition out of agriculture is the increasing then decreasing importance of manufacturing and the increasing importance of services. The figure below, which is taken from a recent survey by Berthold Herrendorf, Richard Rogerson, and Akos Valentinyi, illustrates this pattern for several currently developed countries since 1800.
Structural transformation poses several challenges for policymakers. To see why, a useful starting point is the large literature in economics that describes the mechanismsRead More »