Overseas Development Institute, London.
Leading economist Dani Rodrik shed light on the future of economic transformation in developing countries.
Economic transformation is needed for the type of growth that leads to poverty reduction. It leads to growth that generates income across the income distribution, is robust against price shocks and price cycles, and increases the opportunities and options for future economic growth.
Focusing on economic transformation involves understanding what determines growth and productivity at the micro and macro level. For example, how can resources be shifted to higher-value uses? How can diversification of a country’s productive capabilities, including exports, be encouraged?
But economic transformation in low-income countries is changing. For years, developing countries have tended to transition from agriculture to manufacturing to services. Yet recent evidence suggests that countries are running out of industrialisation options much sooner than expected. Is this a cause for concern? Or are there opportunities in agriculture and services that are just as effective at generating growth and ending poverty?