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Structural transformation to manufacturing and services: what role for trade?

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  • Kym Anderson
  • Sundar Ponnusamy

Abstract

Understanding how and why economies structurally transform as they grow is crucial for sound national policy making. Typically analysts of this issue focus on sectoral shares of GDP and employment. This paper extends that to include exports, including of services. It also considers mining in addition to agriculture and manufacturing, and recognizes some of the products of those four sectors are nontradable. The theory section’s general equilibrium model provides hypotheses about structural change in different types of economies as they grow, and tests them econometrically with annual data for a sample of 117 countries for the period 1991-2014. The results point to the futility of adopting protective policies aimed at slowing de-agriculturalization and subsequent de-industrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously governments now have far more efficient and equitable ways of supporting the adjustments needed by people choosing or being pushed to leave declining industries.

Suggested Citation

  • Kym Anderson & Sundar Ponnusamy, 2018. "Structural transformation to manufacturing and services: what role for trade?," Departmental Working Papers 2018-26, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2018-26
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    Cited by:

    1. Kym Anderson, 2021. "Agriculture’s globalization: Endowments, technologies, tastes and policies," Departmental Working Papers 2021-26, The Australian National University, Arndt-Corden Department of Economics.
    2. Kym Anderson, 2020. "Trade Protectionism In Australia: Its Growth And Dismantling," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 1044-1067, December.
    3. Kym Anderson, 2022. "Agriculture in a more uncertain global trade environment," Agricultural Economics, International Association of Agricultural Economists, vol. 53(4), pages 563-579, July.
    4. Sundar Ponnusamy, 2022. "Export specialization, trade liberalization and economic growth: a synthetic control analysis," Empirical Economics, Springer, vol. 63(2), pages 637-669, August.
    5. Wannaphong Durongkaveroj, 2021. "Structural transformation and inequality: Does trade openness matter?," Departmental Working Papers 2021-10, The Australian National University, Arndt-Corden Department of Economics.
    6. Félix Modrego & Jorge Ortega & Lenia Planas & Álvaro Astudillo, 2022. "Foreign Direct Investment Elasticities of Output, Labor, and Wages in Chile: A Simultaneous Equations Approach," Economies, MDPI, vol. 10(12), pages 1-21, November.
    7. Kym Anderson & Sundar Ponnusamy, 2022. "Structural transformation away from agriculture: What role for trade?," Departmental Working Papers 2022-04, The Australian National University, Arndt-Corden Department of Economics.
    8. Kym Anderson & Sundar Ponnusamy, 2023. "Structural transformation away from agriculture in growing open economies," Agricultural Economics, International Association of Agricultural Economists, vol. 54(1), pages 62-76, January.
    9. Kym Anderson, 2022. "Structural transformation in growing open economies: Australia’s experience," Departmental Working Papers 2022-13, The Australian National University, Arndt-Corden Department of Economics.

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    More about this item

    Keywords

    patterns of structural change; comparative advantage; productivity growth; declining sectors;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative
    • N60 - Economic History - - Manufacturing and Construction - - - General, International, or Comparative
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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