Understanding Productivity Gaps: A Sectoral Perspective on Structural Change in East Asia, Latin America and Africa

Abstract

This thesis examines the process of structural transformation based on the role of productivity gaps in East Asia, Latin America, and Africa. Depending on sectoral data on employment and value-added, the study documents the evolution of economic structures in a sample of fourteen countries, highlighting the divergent trajectories of sectoral shifts over time. Aiming to understand the role of sectoral productivity in explaining structural change, I use a multisector model.Such model study structural transformation by depending on sectoral productivities, non-homothetic preferences, and labor market dynamics. Calibra tion exercises benchmarked against the United States reveal that structural transforma tion trends vary significantly between countries depending on sector-specific productivity growth rates and historical context. The analysis demonstrates that while some economies, such as Hong Kong and Sin gapore, successfully transitioned labor into higher-productivity sectors, others, notably South Africa, experienced premature deindustrialization with limited productivity gains. These findings underscore that structural transformation alone is not sufficient; what matters critically is whether labor is reallocated into sectors capable of sustaining pro ductivity growth. Although the model captures broad sectoral trends, limitations arise from limiting the role of capital accumulation, policy, and historical institutional constraints, which might shape transformation outcomes in practice. That being said, the findings offer signifi cant insights into how structural transformation interacts with productivity dynamics, contributing to the understanding of economic development process.