Developing and Transition Economies in the Late 20th Century: Diverging Growth Rates, Economic Structures, and Sources of Demand

This study reviews the growth and development performance of developing countries in the latter part of the 20th century. Sustained growth among “successful” countries was accompanied by structural change in terms of output and labour share shifts, trade diversification, sustained productivity growth with some strong reallocation effects due to movements of labour from low to high productivity sectors. Neither the widely accepted “twin deficits” nor the “consumption-smoothing” behaviour views of macro adjustment seem to apply, though macroeconomic flexibility may be very important. Finally, neither human capital accumulation nor foreign direct investment are sufficient, by themselves, to stimulate growth.