The Evolving Paradigms of Structural Change

Abstract

The notion of “structures” has evolved over the decades to cover both macro and micro issues, and to hold different meanings. In the 1940s, the focus was on market failures and the active ways in which governments could promote economy-wide change in production, such as agricultural transformation, industrialization, urbanization, and “modernization.” A second wave of thinking in the 1980s highlighted government failures, emphasizing the functioning of markets, institutions, and regulatory and incentives systems. Proponents of the “structural” adjustment programs advocated for restoring external and domestic balances, prescribing Justin Yifu Lin and Celestin Monga The Evolving Paradigms of Structural Change Chapter 16 Page 2 liberalization and privatization. A third and more recent wave of literature seeks to reconcile these extremes. New Structural Economics draws lessons from history to identify factors that help or hinder the reallocation of resources from lowto high-productivity sectors. It promotes the strategic selection of competitive industries according to the comparative advantage, and recommends a new distribution of roles between governments and markets.

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