Oct 29, 2018

Incapable of structural transformation – the IMF Working Paper

A large number of countries have attempted to embark on the path of structural transformation, but not all of them have been able to employ the traditional strategy to develop and modernize their economies with the help of industrialization. The IMF working paper aims at rethinking the theories of structural transformation in the times of globalization and technological revolution.

The IMF working paper „Rethinking Development Policy: Deindustrialization, Servicification and Structural Transformation“ provides an analysis of the role of public policy in structural transformation. It also outlines opportunities and challenges of structural transformation via industrialization – such as increased competition, economies of scale or compensating lack of technology, capital and skills. The paper explains the phenomena of premature deindustrialization and its relation to the countries facing a middle-income trap.

As very few states may have conditions to follow the traditional route of structural transformation, it would not be wise to seek answers solely in this basic model. Similarly, transitioning the economy to producing services may be a key driver of structural transformation only for some countries.

So, what other choices do the states striving for structural transformation have? Why is there a need for a longer-term perspective in policy making? Find out more about the prospective future paths for structural transformation and development policies in the paper.