Technology and Sustainable growth by Devidas Golhar
Ongoing changes in economic structure are important to sustain growth. At lower per capita GDPs, the diversification of economic structures reduces volatility and makes positive growth episodes last longer. As economies develop, services become much more important, but even at higher per capita incomes, manufacturing interacts with services to maintain growth’s momentum. What is clear in all this is that the structure of the economy matters for the ability to sustain growth. Technological change drives structural transformation by generating a continuous flow of new products and productive activities, as a result of which new sectors emerge and old ones shrink that have become technologically obsolete. Technological changes in production processes result in rapid productivity increases, which—in interaction with changes in demand— result in dramatic transformations in the structure of production. The productivity gains driven by technology reduce employment in some sectors and liberate resources that can be employed elsewhere in the economy. The classic example is agriculture, of which the employment share has been declining across the globe.