The incorporation of structural change into growth theory: A historical appraisal

Despite being an empirical fact that structural change is an inseparable companion of the growth process, it appears as if growth theorists have relegated it to a secondary role. One of the reasons for this apparent neglect is undoubtedly the difficulty of dealing with the issues of sectoral dynamics and structural change within the framework of analytical models. A second reason derives from the fact that for a long time the analysis of growth, from a theoretical perspective, has focused predominantly on aspects of supply and technical progress, leaving the analysis of demand and consumption evolution, crucial for the understanding of structural change, aside. The present paper provides an overview of some of the main works in modern growth theory and appraises the introduction of the subject of structural change into the analysis of economic growth. The exposition elucidates the sources and effects of the process of structural change and surveys some of the recent literature from different schools of thought that integrates structural change into their analysis, commenting on their main features and contributions.