Structural transformation, trade and sectoral strategies

Central to the notion of structural transformation are compositional shifts in employment and output towards higher productivity sectors of the economy, particularly “leading sectors” characterized by economies of scale and macro spillovers. Such shifts are argued to give rise to productivity gains within both contracting and expanding sectors. These productivity gains enable higher worker incomes, shorter working hours, and better working conditions more generally, provided productivity gains are equitably distributed. In this sense, structural transformation from the ILO perspective is concerned with both the quantity and quality of employment. Such compositional shifts also typically occur alongside shifts from rural to urban areas, which can give rise to increased urban informal employment and so are linked to rural development policies. In a narrow sense, sectoral strategies are about facilitating structural transformation towards more productive sectors and product and process upgrading within all sectors. But sectoral strategies also involve investments in infrastructure and skills development as well as conducive macroeconomic and trade policies, often with the objective of stronger integration into international markets. In the pressing context of climate change, sectoral strategies must also address the job creation potential of investments in mitigation and adaptation.

There are several strands of work that particularly characterize the work of the Employment Policy Department’s work on structural transformation, trade and sectoral strategies, including:

• an emphasis on data-driven diagnostics and analysis to assess the impact of structural transformation and related investments on employment as well as to identify promising sectors to facilitate structural transformation
• an emphasis on the links between international trade and employment
• a focus on how digital technologies can be used to facilitate the transition from informal to formal employment.

These areas of work are carried out through:

• country-level interventions (technical assistance and policy advice)
• research and knowledge development
• capacity building