Structural change and the ability to sustain growth

This paper examines the relationships between structural characteristics and the ability to sustain growth. The analysis is based on a novel dataset of sectoral shares in GDP and growth rates for 108 countries from 1960 to 2010. Rather than focusing exclusively on average growth rates, the paper examines the characteristics of positive growth episodes. Dependent variables include the duration of positive growth episodes and the risk that such growth episodes come to an end. Structural characteristics include the degree of sectoral specialisation, the share of manufacturing and the share of the modern sector in GDP. We find that higher shares of manufacturing, high and increasing shares of the modern sector and a more diversified structure of production contribute to longer duration of growth episodes and reduced volatility of growth patterns. The effects of these same variables on average growth rates are much more ambiguous.

JEL Classification: O4, O14, 047, L16

Key words: duration of growth, volatility, specialisation, diversification, structure, structural change, structural transformation