Growth, economic transformation, and the changing role of agriculture

1. Growth, economic
transformation, and the
changing role of agriculture
Speakers:
Andrew Dorward
Ephraim Chirwa
James Thurlow

2. • “Development requires structural change”
• countries that have managed to grow and reduce poverty are
those that were able to diversify away from agriculture and other
traditional products
• Lewis Model: labor and other resources move from agriculture
(“traditional rural sector”) into modern economic activities
(“modern urban sector”)  overall labor productivity rises
• Implication: growth can come from productivity growth
within sectors OR from movement of factors across
sectors, i.e. structural change
Note: Economic transformation considers all that goes with that…
output transformation, rural-urban transformation, occupational
transformation, demographic transitioning (Headey 2011)

3. • Africa stands to gain from structural change: large
labor productivity gap between “traditional” and
“modern” sectors
• Puzzling result for Africa 19902005: although positive
growth within sectors, structural change has made a
“sizable negative contribution” (McMillian et al. 2013)
• Remarkable turnaround (20002010): “African Growth
Miracle” can be traced to a significant decline in share
of labor in agriculture (McMillan & Hartnett 2014)
Africa still playing catch up, but results are encouraging;
enormous potential for structural change-led growth

4. • Where is Malawi in all of this?
• Share of labor in agriculture declined (McMillian et al. 2013)…
but generally very little movement in Malawi (McMillan &
Hartnett 2014)
Contribution
to change
Average annual growth rates (%)
2005-
2007
(NSO 2013)
2007-
2011
2005-
2011 2005-2011
Agriculture 15.9 7.3 10.1 34.2
Mining & industry 3.0 11.4 8.5 18.2
Trade and transport 5.5 6.1 5.9 15.2
Private services 7.6 11.7 10.3 23.3
Government services 4.1 6.4 5.6 9.2
National GDP growth 6.2 7.5 7.1 100.0