Characterizing the development of sectoral Gross Domestic Product composition

TL;DR

This paper models the evolution of a country's GDP sector composition using differential equations, revealing distinct development paths and geographic patterns across countries.

Contribution

It introduces a simple differential equation model to characterize sectoral GDP transfer dynamics during economic development.

Findings

Model fits most countries with 4 parameters

Data collapse supports model applicability across countries

Identifies 8 characteristic development paths

Abstract

We consider the sectoral composition of a country's GDP, i.e. the partitioning into agrarian, industrial, and service sectors. Exploring a simple system of differential equations we characterize the transfer of GDP shares between the sectors in the course of economic development. The model fits for the majority of countries providing 4 country-specific parameters. Relating the agrarian with the industrial sector, a data collapse over all countries and all years supports the applicability of our approach. Depending on the parameter ranges, country development exhibits different transfer properties. Most countries follow 3 of 8 characteristic paths. The types are not random but show distinct geographic and development patterns.