Structural Reforms and Labor Productivity Growth in Developing Countries: Intra or Inter-Reallocation Channel?

Jul 19, 2026

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Sectoral data are used to assess how structural reforms implemented during 1975–2005 shaped cross-country differences in aggregate labor productivity growth in developing countries. The study investigates whether reform effects operate through intrasectoral (within-sector) versus intersectoral (between-sector) reallocative channels. Results show productivity gains from many trade, product market, and financial reforms, mainly via intra-allocative efficiency rather than inter-allocative efficiency. Labor market rigidity or flexibility conditions how reforms induce reallocation within and across sectors.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages24

Reading Time1 h 0 min

Introduction

Structural change and productivity growth components

Research question and approach

Reforms studied and reform channels

Pub lic Disclosure Authorized Pub lic Disclosure Authorized The World Bank Economic Review, 36(3), 2022, 646–669 [https://doi.org10.1093/wber/lhac002](https://doi.org10.1093/wber/lhac002) Article Structural Reforms and Labor Productivity Growth in Developing Countries: Intra or Inter-Reallocation Channel? Maty Konte , Wilfried A. Kouamé, and Emmanuel B. Mensah Abstract This paper employs sectoral data to draw conclusions on how structural reforms—implemented during the period 1975–2005—affected differences in cross-country aggregate labor productivity growth in developing countries. Most important, it explores how the effects of reforms on productivity growth are distributed between the intrasectoral and intersectoral components of labor productivity growth. The findings indicate that most of the trade, product market, and financial sector reforms have increased productivity growth. Looking at the subcomponents of labor productivity growth, the results show that structural reforms work mainly through the intra-allocative efficiency channel but not through the interallocative efficiency channel. The intrasectoral component is the main driver of the impacts of reforms on productivity growth, with a contribution that ranges from 76 percent to 96 percent depending on the reform measure considered. The paper also examines the role of labor market regulations and finds that labor market rigidity/flexibility matters for how specific reforms induce reallocation of resources within and across sectors. JEL classification: E24, J24, L16, O47 Keywords: developing countries, productivity growth, structural change, structural reforms 1. Introduction A long-standing observation in economics is that large differences in productivity are the dominant source of the disparities in living standards and GDP per capita across countries Maty Konte (corresponding author) is Research Scholar at the Economics Department at Barnard College, Columbia University, New York City, USA; Research Fellow at UNU-MERIT and School of Business and Economics, Maastricht University, Maastricht, The Netherlands, and Visiting Senior Research Associate at the College of Business and Economics, University of Johannesburg, South Africa. Her email [is mk4415@columbia.edu/konte@merit.unu.edu. Wilfried](is mk4415@columbia.edu/konte@merit.unu.edu. Wilfried) a. Kouamé is Economist at the World Bank, Washington DC, USA; his email [is wkouame@worldbank.org. Emmanuel](is wkouame@worldbank.org. Emmanuel) B. Mensah is Researcher at Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands and affiliated researcher at UNU-MERIT/Maastricht University, Maastricht, The Netherlands and affiliated researcher at the South African Research Chair in Industrial Development, University of Johannesburg, South Africa. His email is [e.b.mensah@rug.nl](e.b.mensah@rug.nl). We would like to thank the Editor, Professor Nina Pavcnik, and anonymous reviewers for useful and constructive comments and suggestions. We are grateful to Neil Foster-McGregor for his excellent comments and guidance. We would also like to thank Jo van Biesebroeck, Marcel Fachamps, Gaaitzen de Vries and Gideon Ndubuisi for their comments and suggestions. Our thanks also go to the participants at the CSAE conference, March 2019, Oxford; UNU-WIDER conference on transforming economies, September 2019, Bangkok, and the participants at the internal seminar at Campinas University, August 2019, São Paulo. © The Author(s) 2022 . Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs licence ([https://creativecommons.org/licenses/by-nc-nd/4.0/](https://creativecommons.org/licenses/by-nc-nd/4.0/)), which permits non-commercial reproduction and distribution of the work, in any medium, provided the or

FAQs

What is the central question of the paper?

How structural reforms affect differences in labor productivity growth across developing countries, and whether these effects occur through intra-sectoral or inter-sectoral reallocation channels.

Which reforms are found to increase productivity growth?

Most trade, product market, and financial sector reforms increase productivity growth, according to the paper’s findings.

Do structural reforms mainly work through intra- or inter-allocative efficiency?

Structural reforms work mainly through the intra-allocative efficiency channel and not through the inter-allocative efficiency channel.

Jul 19, 2026

Upload by Eliana