Role of Structural Change in Economic Growth: An Empirical Evidence from a Panel of Asian Countries

Umar Riaz; Babar Hussain; Arshad Ali Bhatti

doi:10.47264/idea.lassij/4.2.27

Authors

Umar Riaz International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan. https://orcid.org/0000-0002-4964-5809
Babar Hussain International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan. https://orcid.org/0000-0001-7333-3373
Arshad Ali Bhatti International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan. https://orcid.org/0000-0002-5752-6623

DOI:

https://doi.org/10.47264/idea.lassij/4.2.27

Keywords:

Structural change, Economic growth, Asian countries, panel data models, System GMM, [JEL Classification: L16; O47; O53; C23]

Abstract

Economic growth, although being a major quest of all the economies, is not an automatic phenomenon. Among its determinants, structural change in the form of reallocation of labour from low to high productivity sectors is of crucial importance. In view of the remarkable growth performance and unprecedented structural change of Asia in the last couple of decades, this paper empirically investigated the case of 20 selected Asian countries. By employing the data spanning from 1991 to 2018, the study shows three main results. First, by employing Shift Share Analysis framework, it reaffirms the findings of previous literature that structural change contributes to the aggregate productivity growth. Second, by utilizing Generalized Methods of Moments technique, the results find it to be an important booster of growth. Third, the results are reliable and consistent with alternative measures of structural change like Norm of Absolute Values and Modified Lilien Index. Taken together, these findings suggest that the governments in Asia (other regions like Africa and Latin America may alike) must chalk out policies for structural change promotion.

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