Appraising institutional challenges in the early stages of development

It is then the case that wages increase in both sectors, with the effect of prompting employers to use labour-saving and capital-using techniques.5 In this highly simplified description of the development process, the modern sector is the engine of growth of the economy and the structural transformation it generates is another way of describing the modernisation of the economy. [...] As a matter of fact, the reallocation of some of the labour force from low-productivity agriculture to the rest of the economy, including the informal trade sector, despite its relatively low level of productivity, has contributed to overall growth and has reduced the output and employment share of the agricultural subsistence sector. [...] Concerning the sectoral structure of the economy, it can be seen in Table 1 that the share of agriculture is of the same order as in South Korea and Taiwan when those economies were at the same level of income, but also that the share of the manufacturing sector is well below that of the Asian tigers. [...] The prospect of huge rents related to the future exploitation of natural gas has also exacerbated the appetite of rent-seekers and revealed the extent of corruption in Mozambique, at the same time as the ineffectiveness of the state apparatus to control it. [...] The identification of the main obstacles to effective state capacity and the exploration of the role of politics in © Economic Development & Institutions 21 Appraising institutional challenges in the early stages of development: Chapter 7 establishing and implementing the structural transformation of developing economies are the two central issues addressed in the subsequent chapters.