Question

What are the tenets towards ensuring structural economic transformation?

Answer 1

Structural transformation can offer static as well as dynamic benefits. The static benefit is the increase in productivity of labor across the economy, as jobs are working in more competitive sectors. Dynamic gains that follow over time are due to skill upgrading and positive externalities resulting from employees accessing better technologies and accumulating capacity. Competitive structural transformation can be characterized as the process of structural transformation that simultaneously generates productivity growth within sectors and labor shifts from lower higher-productivity sectors, creating more, better-paid, more structured and more competitive employment.

Due to their tradable aspect and their use of modern technologies such as information and communications technology (ICT), tradable services are becoming very popular but they are skill-intensive. Therefore, specializing in these services could generate high-quality jobs (with high wages and learning opportunities), but many developing economies lack the high-skilled labour required for these services. However, considering that only a small fraction of the population can be employed in tradable services, systemic transition to tradable services may not generate sufficient employment opportunities for the vast majority of people.

In these emerging economies, non-tradable services and agriculture are the principal sources of jobs. However, their low labour productivity is reflected in low wages and limited learning and skills accumulation opportunities. Workers in these industries should be able to move out of those jobs to stimulate the mentioned virtuous processes of structural change