The analysis is also undertaken at an aggregate level, offering little insight about constraints affecting different sectors, types of firms or the obstacles to economic transformation in the long run. Economic transformation is important for sustained, broad-based growth as it allows economies to catch up by sustaining high growth rates over extended periods of time (Romer 1990, Aghion and Howitt 1992, Aghion et al.
2005). Empirical evidence shows that not a single country has been able to achieve significant income growth and poverty reduction without structural transformation and economic diversification (Imbs and Wacziarg, 2003). For low income countries and countries with small domestic markets, structural transformation implies export diversification as access to foreign markets enables countries to realize economies of scale (Hausmann, Hwang and Rodrik 2007). The HRV framework also abstracts from conditions affecting the ability of individuals to engage productively and contribute to economic transformation.17
The analysis is also undertaken at an aggregate level, offering little insight about constraints affecting different sectors, types of firms or the obstacles to economic transformation in the long run. Economic transformation is important for sustained, broad-based growth as it allows economies to catch up by sustaining high growth rates over extended periods of time (Romer 1990, Aghion and Howitt 1992, Aghion et al.2005). Empirical evidence shows that not a single country has been able to achieve significant income growth and poverty reduction without structural transformation and economic diversification (Imbs and Wacziarg, 2003). For low income countries and countries with small domestic markets, structural transformation implies export diversification as access to foreign markets enables countries to realize economies of scale (Hausmann, Hwang and Rodrik 2007). The HRV framework also abstracts from conditions affecting the ability of individuals to engage productively and contribute to economic transformation.17
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