Structural Transformation and Productivity in Asia: An Overview

This paper reviews the process of structural transformation (ST) across a wide range of Asian economies. After outlining key theories of ST, it documents Asia’s transformation and compares it with patterns observed elsewhere, using standard indicators and broader dimensions of structural change. It then examines the contribution of ST to productivity growth, drawing on disaggregated data. Finally, it assesses whether Asian economies exhibit signs of premature deindustrialization. The findings show that Asia’s ST broadly mirrors global experience but features a steeper decline in agriculture and faster expansion of services as income rises. Structural transformation has contributed positively to productivity growth, largely through labor reallocation out of agriculture. Agriculture shows the largest productivity gaps relative to the United States, while services show the smallest, suggesting substantial productivity gains from labor shifts toward services. There is no evidence of premature deindustrialization; industrial shares of output and inputs have not declined with higher incomes.