Indexing Structural Distortion : Sectoral Productivity, Structural Change and Growth

This paper proposes a new index of sectoral labor distortion using employment and valueaddedshares. We show that this index is highly correlated with growth both crosssectionallyand over time. We also use it to compare the degree of distortion amongcountries and identify sectors where the potential payoffs in terms of growth from reformscould be large. The regression analysis in the paper shows that education and variousstructural reforms have potential to improve the efficiency of sectoral labor allocation