Executive summary: Sectoral transformation, the process of workers moving from agriculture to manufacturing and services, is critical for economic growth in developing countries. Research reveals key drivers like agricultural productivity, education, and barriers to mobility.
Key points:
Agricultural productivity growth can promote sectoral transformation by reducing labor demand and if the country has limited trade. But it can also incentivize staying in agriculture.
Education expansions lead people to leave agriculture for other sectors, accounting for 20% of historical transformation. But there are negative spillovers on those left behind.
Barriers to mobility across sectors are smaller than believed. Wage gains suggest workers select sectors based on skills.
Now most transformation is into services, not manufacturing. This may reduce growth prospects unless trade, scale, and skills in services can improve.
Overall, drivers that improve agricultural productivity, education, and skills are critical for continued transformation. But global trends pose challenges for traditional manufacturing-led growth.
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Executive summary: Sectoral transformation, the process of workers moving from agriculture to manufacturing and services, is critical for economic growth in developing countries. Research reveals key drivers like agricultural productivity, education, and barriers to mobility.
Key points:
Agricultural productivity growth can promote sectoral transformation by reducing labor demand and if the country has limited trade. But it can also incentivize staying in agriculture.
Education expansions lead people to leave agriculture for other sectors, accounting for 20% of historical transformation. But there are negative spillovers on those left behind.
Barriers to mobility across sectors are smaller than believed. Wage gains suggest workers select sectors based on skills.
Now most transformation is into services, not manufacturing. This may reduce growth prospects unless trade, scale, and skills in services can improve.
Overall, drivers that improve agricultural productivity, education, and skills are critical for continued transformation. But global trends pose challenges for traditional manufacturing-led growth.
This comment was auto-generated by the EA Forum Team. Feel free to point out issues with this summary by replying to the comment, and contact us if you have feedback.
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