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 refers to a fundamental reallocation of an economy’s resources, where labor and output move from low-productivity sectors, mainly agriculture, toward higher-productivity sectors such as manufacturing and services. This shift is a hallmark of development, reflecting productivity gains, diversification, and often urbanization as a country grows. So, shifting from agriculture to higher-productivity manufacturing and services best captures the core change in what the economy produces and in how people work. The other options describe maintaining or amplifying agriculture, reducing services, or relying on natural resources, none of which describe the broad sectoral shift that defines structural transformation.