Work

What causes structural change?

Year: 2025

Type: article

Abstract: Structural change refers to long-term, systematic changes in the sectoral composition of aggregate economic output. Ordinarily, it means the contraction of agriculture relative to industry and services. We analyse its economic causes, using a small, comparative-static, empirically-based computable general equilibrium model of the economy of Thailand. Rapid structural change has occurred in that country over recent decades. We test the explanatory power of five potential contributors to structural change, suggested by simple economic theory and relevant literature: (a) differential growth rates of aggregate supplies of physical capital, labour, and land (the Rybczynski effect); (b) differential growth rates of total factor productivity between sectors; (c) changes in relative international prices; (d) changes in sectoral rates of trade protection; and (e) income growth with differences in expenditure elasticities of demand between final consumer goods (Engel's law). It is concluded that, in Thailand's case, explanation (b) dominates the other four.

Source: Oxford Review of Economic Policy

DOI: 10.1093/oxrep/graf017

Authors: Peter Warr, Arief Anshory Yusuf

Institutions: Australian National University, Padjadjaran University

Language: English

Topic: Economic Theory and Policy

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $5,098