Structural change refers to a long-term shift in the fundamental structure of an economy, which is often linked to growth and economic development. For example, a subsistence economy may be transformed into a manufacturing economy, or a regulated mixed economy is liberalized. A current driver of structural change in the world economy is globalization. Structural change is possible because of the dynamic nature of the economic system.
Patterns and changes in sectoral employment drive demand shifts through the income elasticity. Shifting demand for both locally sourced goods and for imported products is a fundamental part of development. The structural changes that move countries through the development process are often viewed in terms of shifts from primary, to secondary and finally, to tertiary production. Technical progress is seen as crucial in the process of structural change as it involves the obsolescence of skills, vocations, and permanent changes in spending and production resulting in structural unemployment.
Historically, structural change has not always been strictly for the better. The division of Korea and the separate paths of development taken by each state exemplifies this. Korea under Japanese rule was relatively uniform in economic structure, but after World War II, the two countries underwent drastically different structural changes due to drastically different political structures.
Structural change can be initiated by policy decisions or permanent changes in resources, population or the society. The downfall of communism, for example, is a political change that has had far-reaching economic implications.
Structural changes in employment
Economic structural changes impact also on employment. A developing economy typically reveals a high share of employment in the primary sector, while the share of employment in the tertiary sector is high in an advanced/developed economy.
Test for structural change
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