Structural transformation under Maslow's hierarchical needs: A numerical experiment

The economic structural transformation is deeply intertwined with phenomena such as globalization and inequality, and understanding this transformation has salient policy implications. However, comprehending the intricate phenomena related to economic structural change continues to pose challenges. This study incorporates Maslow's hierarchy of needs, grounded in psychology, into a three-sector model. Through numerical experiments, we effectively replicate canonical Kuznets facts, particularly the inverted U-shaped manufacturing trajectory over development. The findings provide novel insights into the interaction between asymmetric sectoral productivity growth and evolving preferences in reshaping economic sectoral composition, confirming that advancements in both agricultural and manufacturing productivity jointly facilitate structural transformation. Additionally, progress in agricultural productivity can promote a larger share of manufacturing in the economy.