Using Capabilities To Project Growth, 2010-30
The authors forecast growth rates for 2010-2030 by estimating a cross-country reduced form conditional-convergence regression, augmented with variables that account for a country's accumulated capabilities and capacity to undergo structural transformation. They define structural transformation as the process by which countries change what they produce and how they do it. It also involves the upgrading and diversification of the production and export baskets. Structural transformation results in shifts in the output and employment structures, away from low-productivity and low-wage activities into high-productivity and high-wage activities. As a consequence, structural transformation is the key for a country to shift from low-income to high-income.