On the importance of manufacturing sectors for economic development and growth

Various attempts have been made to empirically understand the role of economic sectors in development and growth processes. In this work, we develop an innovative methodology to assess associations in a cross-country multi-sectoral dataset based on complex network-related approaches.This paper generalizes existing concepts—such as the “product space”, which identifies a core-periphery pattern of the global economy using export data—by first considering total economic activities in terms of value-added data deduced from multi-regional input-output tables and, second, by assessing the relationship between inter-sectoral imbalances and overall economic growth.We find clearly distinguishable groups of sectors, mainly agricultural, industrial, services and resource extractive sectors. These are primarily linked via light manufacturing sectors. The existence of these sectoral bottlenecks, or bridges that are stable over time, allows us to conclude that (i) the buildup of specific manufacturing sectors is crucial for establishing the capabilities required for transitional growth and (ii) leapfrogging an economy’s industrialized state is difficult. Along with the directionality information derived from the analysis of sectoral imbalances, our results are consistent with and expand classical sectoral ladder models towards a sectoral “climbing wall” where multiple development routes are conceivable. Those are, however, constrained by specific identifiable bottlenecks. Our conclusions have notable implications for any attempts to alleviate poverty and foster growth in light of global environmental change.