ABSTRACT
The economic growth literature has advanced from the time of Solow in conceptual underpinnings, buttressed by the availability of data on the evolving features of economies and advances in numerical methods to more easily confront theory with data. To limit the scope of our non-mathematical review, we focus on the economic growth literature dealing with aspects of structural transformation as economies evolve over time. This transition entails three main features, with numerous microeconomic components: change, or lack thereof, in sector value-added share in economies’ total value added; change in sector factor share in total factor payments; and change in sectoral labor productivity. We first focus on an overview of this literature from 1990 to 2006, and then in somewhat more detail from 2006 to the present. We find the use of structural multi-sector-general equilibrium models of endogenous savings for partial equilibrium statistical-based models and for insights provided by growth accounting exercises. We find the literature providing relatively more insights into the forces causing change in sector value-added shares and labor share in total sector factor payments, but it falls far short of explaining differences in sector labor productivity and its evolution over time. Nevertheless, the progress made thus far serves to broaden the scope for further investigation. This includes the effects on structural transformation of: intra-sectoral competition and product and process discovery and public capital, broadly defined to include institutional arraignments. Progress thus far should also facilitate studying the effects of climate change and the exhaustion of natural resource stocks on transformation and sustainability.
JEL classifications E1, O11, O14, O41,
