Muhamed Zulkhibri, Ismaeel Naiya and Reza Ghazal
This paper aims to investigate the relationship between structural change and economic growth for a panel of four developing countries, namely, Malaysia, Nigeria, Turkey and…
Abstract
Purpose
This paper aims to investigate the relationship between structural change and economic growth for a panel of four developing countries, namely, Malaysia, Nigeria, Turkey and Indonesia over 1960-2010.
Design/methodology/approach
The study extent the growth equation by incorporating degree of openness, labour and investment and construct structural change indices – modified Lilien index and the norm of absolute values. It utilizes the recently developed panel cointegration techniques to test and estimate the long-run equilibrium of the growth equation.
Findings
The results confirm that structural change and economic growth are cointegrated at the panel level, indicating the presence of long-run equilibrium relationship. However, the impact of structural change on economic growth seems to be small and evolve slowly.
Originality/value
The findings indicate the need for policymakers to identify the binding constraints that impede growth and the importance of institutionalize policy to encourage investment in productive sectors.