ABSTRACT
Economic growth has been associated with changes in economic structure. Before the Industrial Revolution in the eighteenth century, the world economy grew very slowly and changed structure very little relative to the recent standard (Kuznets, 1966; Maddison, 2003). Modern economic growth has been characterised by an increase in population and an even faster increase in output, leading to higher growth in per capita income (Kuznets, 1966). This sustained income growth was not accompanied by the proportional increase in the outputs of different sectors but by continuous changes in the economic structure. A rapid increase in the share of industry with a decline of agricultural share, or industrialisation, initially plays a key role in catapulting the economy into a higher growth path (Ocampo et al., 2009). 2 The importance of manufacturing relative to agriculture for economic growth has been attributed to the higher economies of scale of the former, higher income elasticity of demand for manufactured goods and higher potential of productivity catch-up of the manufacturing sector (Kaldor, 1967; Chenery et al., 1986; Rodrik, 2011; Weiss, 2011). Manufacturing normally ceases being a dominant engine of growth when countries reach a high per capita income of roughly US$14,000 (in constant 2005 purchasing power parity, PPP). 3 Thereafter, the service sector’s contribution to the economy carries an increasingly larger weight, and the manufacturing share tends to gradually decrease, although such a description based on official statistics tends to conceal an increasingly interdependent nature of the development of manufacturing and fast growing business-related services (Franke and Kalmbach, 2005; Tahara, 2009; Tomlinson, 2012). The development of an efficient and dynamic service sector depends especially on the kind of manufacturing structure that a country has established (Guerrieri and Meliciani, 2005).
