Structural Transformation and Export Diversification in Southern Africa

What determines economic disparities among countries and how can we move forward to reduce these income gaps? The development economics literature has studied how countries get rich since the time of Lewis (1954).

This literature primarily attributes economic development to the process of structural transformation – economies grow as resources shift towards progressively more productive sectors.

The speed at which this transformation occurs, in turn, determines why some countries get rich faster than others.

This paper analyses the structural transformation and export structures of five Southern African economies:

  • Mauritius

  • Mozambique

  • South Africa

  • Tanzania

  • Zambia

The economic transformation is assessed in terms of both domestic output and international export composition. The focus on export structures is motivated by three factors.

First, recent literature on structural transformation has shown export structure to be a good predictor of economic growth and therefore one of the possible explanations of cross-country income disparities (Hausmann et al., 2007; Hausmann et al., 2011).

Second, countries generally export those goods where they have a comparative advantage, hence examining the export structure can help to understand the underlying knowledge or institutional advantages that make a country competitive (Hausmann and Klinger, 2007; Hidalgo et al., 2007).

Finally, in the absence of disaggregated, cross-country production data, export data provide a useful approximation of the productive structures in an economy.

The rest of the paper is structured as follows:

Section 2 summarizes the structural transformation literature.

Section 3 gives an overview of the economic and export trends of the five economies under scrutiny.

Section 4 analyses structure changes and export structures for each of them.

In section 5, we propose an experiment of regional integration, which aims at understanding how export diversification opportunities would change if the five countries would act as a single economy.

Section 6 concludes.