economic transformation
In economics, economic transformation refers to the continuous process of (1) moving labour and other resources from lower- to higher-productivity sectors (structural change{{cite journal |first=Berthold |last=Herrendorf |first2=Richard |last2=Rogerson |first3=Ákos |last3=Valentinyi |title=Growth and Structural Transformation |journal=NBER Working Paper No. 18996 |date=April 2013 |doi=10.3386/w18996 |doi-access=free }}) and (2) raising within-sector productivity growth.McMillan, M., J. Page, D. Booth and D.W. te Velde (2017). [http://set.odi.org/set-approach-paper/ Supporting Economic Transformation: An approach paper.] As such, economic transformation emphasises the movement from low- to high-productivity activities within and across all sectors (which can be tasks or activities that are combinations of agriculture, manufacturing and services). This movement of resources from lower- to higher-productivity activities is a key driver of economic development.{{cite journal |last=McMillan |first=M. |last2=Rodrik |first2=D. |title=Globalization, Structural Change and Productivity Growth |journal=NBER Working Paper No. 17143 |date=June 2011 |doi=10.3386/w17143 |doi-access=free }}
Within-sector productivity growth (also called ′sector transformation') entails the adoption of new technologies and management practices that increase the efficiency of production. It can come about as a result of the increased efficiency of existing firms or as a result of the reallocation of resources away from the least productive firms towards more productive firms.
Measures of economic transformation
Economic transformation can be measured through production/value-added measures and trade-based measures. Production-based measures include: (1) sector value added and employment data, to show productivity gaps between sectors; and (2) firm-level productivity measures, to examine average productivity levels of firms within one sector.McMillan, M., J. Page, D. Booth and D.W. te Velde (2017). [http://set.odi.org/set-approach-paper/ Supporting Economic Transformation: An approach paper.]
Trade-based measures include: (1) measures of revealed comparative advantage to show the levels of specialisation of a country in certain exports; and (2) export diversification measures such as those produced by the International Monetary Fund.International Monetary Fund Diversification Toolkit, available here: https://www.imf.org/external/np/res/dfidimf/diversification.htmKennan, J. and te Velde, D. (2015). [http://set.odi.org/data-portal/sources-and-methods-of-data-for-economic-transformation/ Sources and methods of data for economic transformation].
References
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Further reading
Calabrese, L. and Tang, X. (2020) [https://degrp.odi.org/publication/africas-economic-transformation-the-role-of-chinese-investment/ Africa’s economic transformation: the role of Chinese investment]
McMillan, M., J. Page, D. Booth and D.W. te Velde (2017). [http://set.odi.org/set-approach-paper/ Supporting Economic Transformation: An approach paper]
Worral, L. K. Vrolijk, C. Mason and N. Balchin (2015). [http://set.odi.org/baseline-on-economic-transformation/ Baseline on economic transformation: Review of the international, regional and domestic literature on economic transformation]
External links
- [http://set.odi.org/ Supporting Economic Transformation programme]
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