It is well known that the process of economic development is accompanied, at the macro level, by a number of economic and social transformations, such as structural change, formalisation of production, increases in schooling, technological improvement, and cultural change. However, the evidence is scant on how these processes unfold at the micro level. Which individuals are the engines of these aggregate transformations? Are these transformations driven by the younger generations of more educated individuals? Or do they affect everyone in a similar vein? Are they driven by internal migration towards more productive areas? Or are they equally spread out across space? How do the answers to these questions differ across countries and stages of development? This project examines these questions to shed light on how exactly countries grow.
The research team build a data infrastructure that allows them to unpack the stylised facts of economic development into their corresponding disaggregated counterparts. Specifically, they harmonise micro-level data from IPUMS International, the Luxembourg Income Study, and the Living Standards Measurement Study, covering a large sample of countries at different levels of development. The result is a cohort-level dataset of several key quantities of interest in the process of economic growth, including income, education, labour force participation, self-employment, occupation, and sector of employed. This dataset is then used to quantify the role of new cohorts in driving two key trends associated with economic development: income growth and the transition from own-account work to wage employment.
This dataset and analysis provide valuable insights on how structural transformation happens in practice, at the micro level, and across a wide spectrum of countries. This is essential in order for policymakers to know which individuals are more likely to be affected by policy, whether they are those born or living in more backward regions or in more developed ones, whether they are young workers just starting their career, or whether they are more experienced workers. Focusing on new cohorts as potential drivers of economic and social transformation makes the findings of this project particularly relevant for sub-Saharan African countries, which are experiencing a dramatic growth in their working-age populations. This suggests enormous opportunities to shape the process of economic growth through policies that provide opportunities to young generations. This project helps to understand where and how this process is working effectively and where less so.