Structural Changes and Economic Growth in the New Industrialized Countries

Structural change can contribute to economic growth through an improvement in utilization of resources along with the traditional factors such as physical capital human capital, and technology. In this paper, we investigate the impact of structural change on economic growth in the new industrialized countries (NIC). Among many variables traditionally used as proxies for structural changes, we identify 20 variables to represent the structural changes in 11 NICs for the period 1970-2004. We then use principal components and dynamic factor analysis to obtain an index for structural changes in these countries. Our estimation results obtained from the growth equation indicate that structural change has had a positive and significant effect on economic growth in NICs.