Structural transformation and quality ladders: Evidence from the new Theil's decomposition

This paper examines structural transformation along the development path by linking export concentra-tion to economic development in a cross-country setting. I explore the role of widening product mix, export restructuring , quality upgrading for the patterns of export concentration measured by the weighted Theil index. This study contributes to the literature by developing the decomposition of this index into the extensive, quantitative and qualitative components. I find that structural transformation is primarily driven by export restructuring according to the world demand and towards the products with higher potential to improve quality. Controlling for the world demand, re-specialization is not pronounced at a high level of economic development, while the ability to upgrade quality becomes increasingly im-portant for the higher-middle-income and high-income countries. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

This paper examines the impact of export concentration on economic development and finds that structural transformation is primarily driven by global demand. The ability to upgrade product quality becomes increasingly important in high-income and middle-high-income countries according to the author.