The structural transformation of transition economies

This paper places recent growth and structural transformation in the former-Soviet Union (FSU) countries in comparative perspective. It introduces the Economic Transformation Database of Transition Economies, which provides consistent annual data of employment, real and nominal value added by 12 sectors in 14 FSU countries for the period 1990–2019. We find that structural change in FSU countries has been uniquely growth-reducing as workers relocated to less productive sectors. This contrasts to sub-Saharan Africa, Latin America, developing Asia, and the formerly centrally planned economies of Central and Eastern Europe (CEE), where labour has shifted from low- to high-productivity sectors. Our analysis reveals that average aggregate productivity growth was 0.64 percentage points lower each year in FSU countries, while it was 0.31 percentage points per annum higher in CEE countries due to their differing patterns of structural change. We argue that these differences stem from varying initial conditions, external factors, and reform strategies. • Comparative study of growth and structural change in transition and FSU economies. • New database: annual jobs and value added in 12 sectors, 14 FSU countries, 1990–2019. • In FSUs, structural change reduced growth: workers moved to less productive sectors. • In FSUs, structural change cut growth by 0.64 percentage points per year on average. • Structural change enhanced growth in developing regions, incl. CEE economies.