What does structural transformation refer to in development?

What does structural transformation refer to in development?

• A. Shifting from agriculture to higher-productivity manufacturing and services.
• B. Increasing agricultural output without changing sectors.
• C. Reducing service sector employment.
• D. Relying exclusively on natural resource extraction.

Answer: (A)

Structural transformation means moving resources and activity from low-productivity sectors like agriculture into higher-productivity areas such as manufacturing and services. In development, this shift is paired with growing productivity in those advanced sectors, a larger share of overall GDP and employment coming from industry and services, and often urbanization as the economy diversifies.

So the best choice captures that sectoral shift from farming to more productive manufacturing and services, which drives sustained growth and higher incomes. Increasing agricultural output without changing sectors focuses on farming alone, not the broad reorganization of the economy. Reducing service sector employment would work against the idea of expanding higher-productivity services, and relying exclusively on natural resource extraction describes a resource-based path rather than diversification into higher-productivity industries.