Structural Transformation and Quality Ladders : Solving the 'Theil's Cube'

We propose a decomposition of weighted Theil index of export concentration into the quantity- and quality-driven terms and calculate the proposed components for 5038 product groups and 120 countries. We link our findings to the debate on the role of quality upgrading in structural transformation. The results do not support the idea that climbing quality ladders (or quality upgrading within the actually exported products) is the best way to proceed with structural transformation: for most countries, the share of the quality-driven component of weighted Theil index doesn't exceed 20 per cent