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Structural Transformation to Manufacturing and Services: What Role for Trade?

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  • Kym Anderson

    (Emeritus Professor, University of Adelaide and Honorary Professor of Economics, Australian National University.)

  • Sundar Ponnusamy

    (PhD candidate, University of Adelaide.)

Abstract

Understanding how and why economies structurally transform as they grow is crucial for making sound national policy decisions. Typically, analysts who study this issue focus on sectoral shares of gross domestic product and employment. This paper extends those studies to include exports, including exports of services. It also considers mining, in addition to agriculture and manufacturing, and recognizes that some of the products of these four sectors are nontradable. The section on theory presents a general equilibrium model that provides hypotheses about structural change in different types of economies as they grow. These are then tested econometrically with annual data for the period 1991–2014 for a sample of 117 countries. The results point to the futility of adopting protective policies aimed at slowing deagriculturalization and subsequent deindustrialization in terms of sectoral shares, since those trends inevitably will accompany economic growth. Fortuitously, governments now have more efficient and equitable ways of supporting adjustments needed by people who choose or are forced to leave declining industries.

Suggested Citation

  • Kym Anderson & Sundar Ponnusamy, 2019. "Structural Transformation to Manufacturing and Services: What Role for Trade?," Asian Development Review, MIT Press, vol. 36(2), pages 32-71, September.
    • Handle: RePEc:tpr:adbadr:v:36:y:2019:i:2:p:32-71
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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, 2022. "Structural transformation in growing open economies: Australia’s experience," Departmental Working Papers 2022-13, The Australian National University, Arndt-Corden Department of Economics.
    9. 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.

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    More about this item

    Keywords

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

    JEL classification:

    • 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
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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