The determinants of structural change: Transformation pressure and structural change in Swedish manufacturing industry, 1870–1993

Abstract

In this article we investigate the relationship between structural change – defined as the distribution of value added between the industrial branches – and transformation pressure in Swedish industry 1870–1993. The objective is to investigate signs of a change in this relationship during the 1970s. Quite surprisingly, the investigation showed the change occurred in the early 1950s. The rate of structural change is estimated by using an angle measure and is then compared with the dispersion of gross profit shares (GPS) between nine branches of Swedish industry. The dispersion of GPS is used as an indicator of the transformation pressure. A good correlation was present until the early 1950s, when a change in the relationship between GPS dispersion and actual structural change was observed. Furthermore, we suggest that the change in the relationship may be understood either as the result of institutional factors affecting the resource allocation or as an outcome of growth itself, supported by the hypothesis that a higher capital intensity led to market concentration and natural barriers to entry, possibly reinforced by a higher degree of specialisation