In this chapter, I discuss various different approaches to the analysis of structural change.
The next two sections focus on the shift of employment and production from agriculture to manufacturing, and then from manufacturing to services. This is a useful starting point both because changes in the composition of employment and production are an important part of the process of economic development and also because, as emphasized by Kuznets and others, similar changes are present even beneath the faςade of balanced modern growth.
Consequently, these two sections will focus on demand-side and supply-side reasons why we may expect structural change as an economy becomes richer but also emphasize how such structural changes can be reconciled with balanced growth. Section 20.3 turns to a related theme. As emphasized in Chapter 1, industrialization appears to be an important element underlying the takeoff that led to modern growth and thus to the large cross-country income differences we witness today. In this section, I present a simple model of industrialization, which again emphasizes the importance of structural change but also shows how pre-industrial agricultural productivity may be a key determinant of the process of industrialization and takeoff.20.1.
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