Structural change and poverty reduction in developing economies

This paper presents an empirical framework that explores the relationship between poverty reduction and changes in the production structure of developing countries. We use the new GGDC/UNU-WIDER Economic Transformation Database to measure productivity growth within sectors and structural change – the reallocation of workers across sectors – for 42 developing countries from 1990 to 2018. Regression analysis indicates that poverty reduction significantly relates to productivity growth, particularly within manufacturing, and to structural change. An attribution analysis suggests that structural change and increased agricultural productivity contributed to reducing poverty in developing countries of Asia and sub-Saharan Africa. The contribution of productivity growth in manufacturing appears to be a prominent factor in poverty reduction in developing Asia but less so in sub-Saharan Africa.