Aid, Structural Change, and Productivity Growth in Developing Countries

This thesis investigates structural change in developing countries, with a focus on sub-Saharan Africa and the former Soviet Union. Virtually all cases of sustained economic growth have involved large-scale reallocation of labour and resources from low- to high-productivity sectors, often to manufacturing, and often alongside rapid urbanization. Yet many developing regions have not undergone such structural transformation, or have done so under significant distortion.

This thesis shows that, with the exception of a small number of atypical countries, Sub-Saharan Africa has neither industrialized nor deindustrialized. A major feature of its post-independence landscape has been the prevalence of foreign aid. Whilst widely analyzed, the effects of aid
remain ambiguous. This thesis presents new evidence showing that, on average, aid has impeded industrialization and reduced urbanization across the region.

By contrast, the countries of the former Soviet Union and Eastern Europe experienced structural change in reverse. Overindustrialized at the end of the Cold War, many underwent rapid deindustrialization, often without expanding alternative high-productivity sectors for excess manufacturing labour to relocate to. In the Soviet successor states, this shift has contributed negatively to aggregate productivity since 1990, in contrast with the former centrally planned economies which went on the EU ascension path. The chapters of this thesis offer new data and new insights into the complex relationship between structural change and long-run development, in addition to methodological contributions.