Date Added: Jun 2011
Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, the authors document these gaps, and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. The results show that since 1990 structural change has been growth reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries' productivity performance and that of Asia is accounted for by differences in the pattern of structural change - with labor moving from low-to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa.