The ladder of development

An interesting new NBER working paper that will be a chapter in the Handbook of Economic Growth (ungated version here), gives some great pictures of the structural transformations we call development from 1800 – 2000.

Here’s the evolution of Agriculture’s share of employment in some rich countries (you can clic all the pics for better images):

agshare

At a GDP per capita of $700, agriculture is 80-85% of total employment. By the time a country hits the $3000 mark, it’s down to 40%, and at $22,000 it is negligible.

Getting people out of subsistence agriculture is job one of development!

As the switch from agriculture to manufacturing happens, countries get richer:

manunew

At $700, there is virtually no manufacturing employment, at $3000 manufacturing is around 40% of total employment. By the time a country hits $22000, manufacturing has fallen to around 20% of employment.

Then there’s services:

servicesnew

Poor countries have very little service sector employment, the richest countries in 2000 had around a 75% services share in total employment.

Here’s the countries in the graphs (see the paper for more details):

legendnew

As far as we know, this set of structural transformations is the only way for a country to get rich. High employment in services isn’t the sign of a problematic economy, it’s a sign of a very rich economy.

One thought on “The ladder of development

  1. Pingback: Economic growth explained in three graphs | kariobangi

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