Asia’s Structural Transformation: Patterns, Challenges, and New Stylized Facts

Structural transformation is widely recognized as a key driver of productivity growth and economic development, with industrial policies often playing a crucial role in this process. However, the challenge of premature deindustrialization—where economies experience a decline in manufacturing’s share of employment and gross domestic product at lower levels of income than historically observed in advanced economies—threatens to undermine these gains, particularly in developing economies. This paper provides a comprehensive overview of the literature on structural transformation and modern industrial policy, with a particular focus on Asia, a region characterized by economies at considerably different stages of development. Our research encompasses a review of current empirical methodologies for measuring structural transformation and its relationship with growth patterns; an examination of the evolution of industrial policy approaches in Asia; and a synthesis of available evidence on premature deindustrialization, highlighting variations across Asian subregions and policy implications. Additionally, we contribute to the existing literature by presenting new stylized facts on structural transformation and growth patterns in Asia, based on various indicators across economies and sectors. We also examine how institutional and economic factors—including financial sector development, public investment, and labor market regulations—correlate with indicators of structural transformation. Our analysis reveals key insights, including the strong link between manufacturing predominance and labor productivity growth; complex productivity–employment dynamics across sectors; and differentiated impacts of financial development, public investment, and labor market regulations on sectoral employment shifts.