Structural Transformation and Productivity in Asia: An Overview

I provide an overview of the process of structural transformation (ST) in a broad range of Asian economies. After briefly discussing theories of ST, I describe the process of transformation in Asia and compare it to other countries focusing on standard measures as well as other important aspects of the process of economic transformation. I then focus on the potential role of ST for productivity growth and productivity catch-up using more disaggregated data. Finally, I ask whether premature de-industrialization has been a feature of ST in Asian economies. The main findings of this overview are as follows: i) Asia has followed a pattern of ST that is consistent with other economies in the world, but where the gradient of contraction in agriculture and expansion in services with development is larger; ii) ST has broadly had a positive effect on productivity growth driven by workers moving out of agriculture; iii) agriculture is the sector that displays the largest productivity gaps with the US and services the lowest implying, mechanically, that large productivity gains can be achieved with workers moving from agriculture to services; iv) there is no evidence of premature de-industrialization in Asia and, if anything, industrial value added shares have not decreased at higher levels of development as in other countries.