Structural transformation and its relevance for economic growth in Sub‐Saharan Africa

Abstract

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The Effects of the Catch-Up Mechanism on the Structural Transformation of Sub-Saharan Africa

“…Since the McMillan et al (2014) striking finding that in many Latin American and Sub-Saharan African countries the broad patterns of structural change between 1990-2000 have served to reduce rather than increase economic growth, there has been a growing interest in SSA specific studies of structural transformation. Busse et al (2019) find that although the agricultural sector is still dominant, a structural transformation has taken place and that it has significantly contributed to African growth in the period 1980-2014. Busse et al (2019) use a two-sector model of agriculture and non-agriculture without distinguishing between the industrial and service sectors, and they do not account for the non-classical nature of structural change unfolding in SSA.…”

“…Busse et al (2019) find that although the agricultural sector is still dominant, a structural transformation has taken place and that it has significantly contributed to African growth in the period 1980-2014. Busse et al (2019) use a two-sector model of agriculture and non-agriculture without distinguishing between the industrial and service sectors, and they do not account for the non-classical nature of structural change unfolding in SSA. Studying the Tanzanian economy, Diao et al (2018) find that although employment in the formal sector has increased, the bulk of growth is accounted for by firms in the informal sector.…”

“…The non-classical structural transformation unfolding in Sub-Saharan Africa (SSA) is engendering a lot of policy debates, and raising questions about the sustainability of the recent rapid economic growth rates. Some studies have focused on whether the rapid growth rates have been accompanied by structural change (Busse et al 2019;McMillan et al 2014;De Vries et al 2015). Others, such as Harchaoui and Üngör (2018), have probed the potential relationship between rapid growth rates and convergence to the U.S. level of income per capita.…”

Natural resources, technological progress, and economic modernization

“…Wells and Thirwall (2003) tested all three of Kaldor’s growth laws for contemporary African economies and found that, despite the rising importance of the services sector, the aggregate growth of GDP is overwhelmingly attributable to the growth of the manufacturing value added. In a recent panel analysis Busse, Erdogan, and Mühlen (2018) try to disentangle the sources of economic growth in 41 sub‐Saharan African countries over the period 1980–2014 and show that structural change contributes significantly to economic growth in the region. Hence, despite the discussion on the waning star of the manufacturing sector as the leading sector, it is still more than justified to conceptualize modern manufacturing as the driver of economic modernization.…”

Structural Transformation, Service Sector Growth and Poverty Alleviation: The Role of Formal–Informal Interaction and Rising Informal Wage

“…Some scholars maintain that agriculture can play an important role in economic growth and the reduction of poverty. Busse et al (2018) explained the role of structural transformation in economic growth in sub-Saharan Africa, by estimating the overall productivity of the economy from productivities of different sectors. The results showed that although agriculture continues to employ a majority of the workforce, structural transformation has taken place in the continent and significantly contributed to economic growth.…”