In economics, economic transformation refers to the continuous process of (1) moving labour and other resources from lower- to higher-productivity sectors (
structural change) and (2) raising within-sector
productivity
Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proce ...
growth. As such, economic transformation emphasises the movement from low- to high-productivity activities within and across all sectors (which can be tasks or activities that are combinations of agriculture, manufacturing and services). This movement of resources from lower- to higher-productivity activities is a key driver of economic development.
Within-sector productivity growth (also called ′sector transformation') entails the adoption of new technologies and management practices that increase the efficiency of production. It can come about as a result of the increased efficiency of existing firms or as a result of the reallocation of resources away from the least productive firms towards more productive firms.
Measures of economic transformation
Economic transformation can be measured through production/value-added measures and trade-based measures. Production-based measures include: (1) sector value added and employment data, to show productivity gaps between sectors; and (2) firm-level productivity measures, to examine average productivity levels of firms within one sector.
Trade-based measures include: (1) measures of
revealed comparative advantage to show the levels of specialisation of a country in certain exports; and (2) export diversification measures such as those produced by the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
.
[Kennan, J. and te Velde, D. (2015)]
''Sources and methods of data for economic transformation''
References
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Further reading
Calabrese, L. and Tang, X. (2020
''Africa’s economic transformation: the role of Chinese investment''
McMillan, M., J. Page, D. Booth and D.W. te Velde (2017)
''Supporting Economic Transformation: An approach paper''
Worral, L. K. Vrolijk, C. Mason and N. Balchin (2015)
''Baseline on economic transformation: Review of the international, regional and domestic literature on economic transformation''
External links
Supporting Economic Transformation programme
{{Authority control
Economic development
Economic growth
Economic theories