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First, growth-promoting structural change has been significant in the recent experience of low-income countries such as Ethiopia, Malawi, Senegal and Tanzania, despite the absence of industrialization. Labor has been moving from low-productivity agricultural activities to higher-productivity activities, but the latter are mostly services rather than manufacturing. Second, rapid structural change in these countries has come at the expense of mostly negative labor productivity growth within non-agricultural sectors. The difference seems to be explained by the fact that the expansion of urban, modern sectors in recent high-growth episodes is driven by domestic demand rather than export-oriented industrialization.In Ethiopia, for example, public investments in irrigation, transport and power have produced a significant increase in agricultural productivity and incomes. If productivity is not growing in these modern sectors, economywide growth ultimately will stall. The contribution that the structural-change component can make is necessarily self-limiting if the modern sector does not experience rapid productivity growth on its own.Low-income African countries can sustain moderate rates of productivity growth into the future, on the back of steady improvements in human capital and governance.
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