STEG: a new research initiative

STRUCTURAL TRANSFORMATION AND ECONOMIC GROWTH (STEG) :

A new research initiative launched to underpin development policy in low- and middle-income countries

As low-income countries begin to look beyond the COVID-19 pandemic, a new research programme aims to strengthen their potential for achieving long-run growth and economic transformation.

The research programme on Structural Transformation and Economic Growth (STEG) is funded by the United Kingdom’s Department for International Development (DfID) as part of the UK aid effort. STEG will support research that provides a deeper understanding of the fundamental economic processes of structural change and productivity growth in low- and middle-income countries. It will be launched at a workshop on 4-5 June, with keynote addresses by the IMF’s Chief Economist and a former Chief Economist of the World Bank.

“Low-income countries now face a huge challenge”, said Prof Douglas Gollin (Oxford and CEPR), STEG’s Research Director. “The global pandemic will have a tragic impact, especially on the poor. But low-income countries also face the prospect of a severe global economic slowdown, and many of them will need to rethink their growth strategies. Our research programme will pose fundamental questions about the nature of long-run growth and the transformation out of quasi-subsistence agriculture. The answers to these questions will guide low-income countries in choosing effective policies as they emerge from the pandemic.”

STEG will be carried out by a consortium led by the Centre for Economic Policy Research (CEPR) and including the University of Oxford, the University of Notre Dame, the African Center for Economic Transformation, the Yale Research Initiative on Innovation and Scale, and Gröningen University's Growth and Development Center. STEG is committed to making top-quality academic research in development economics directly relevant to the concerns of policy-makers. It will help developing country governments, non-governmental organisations and the private sector to design and implement policies that promote productivity gains, structural change and economic growth that are both sustained and sustainable.

STEG’s initial five-year research programme (budgeted at £12 million) seeks to build a community of researchers working on the structural transformation of low- and middle-income countries; and to link research to policy. Research will be funded primarily through competitive calls along a number of thematic areas, beginning in mid-2021. These calls will follow an initial inception phase devoted to shaping and sharpening the research focus. In this first year of the project, a set of pathfinding papers will summarise key policy questions; synthesise the findings of relevant academic research; identify important evidence gaps and open research questions; and begin the process of disseminating existing and new knowledge to stakeholders through a wide range of communications channels.

STEG’s research programme will analyse structural transformation as a set of interconnected transitions that economies undergo in the course of economic growth and development.

Prof Joe Kaboski (Notre Dame and CEPR), who leads the STEG Academic Steering Committee, says, “Not all economies follow the same pathway, but certain patterns recur across countries and over time. Economic activity moves out of agriculture and into other sectors of the economy. Work moves from home to market; within the market, labour tends to move from self-employment and subsistence agriculture into larger production units. People move from rural areas to urban areas. We don’t fully understand the relationships among these different dimensions of transformation – and we certainly don’t yet understand causality. There is an urgent need for research, and the global crisis raises fundamental questions for countries with respect to their growth and development strategies.”

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