Structural change and domestic technological capabilities

Abstract

This paper examines the role of structural change as a source of economic growth and institutional and technological change. With the creation of new activities in the economy, significant changes occur in institutions and in the way domestic production capabilities are organized, which alters the ultimate sources of growth in society. This is a complex process that involves ubiquitous externalities and new forms of clustering and direct interdependence between economic agents that the language of modern growth theory cannot fully capture. Neoclassical growth models construe economic growth in terms of an institution-free equilibrium algorithm that affords insufficient consideration to macro-to-micro interactions, changes in the structure of production, the co-evolution of economic, institutional and technological forces and the process of creation and destruction of production organization capabilities that obtains in the economy during the growth process. This paper argues that precisely these macro-to-micro interactions and the creation of new institutions and capabilities constitute the essence of development.