# **1. Introduction: Theoretical framework**

# **_1.1. Issues and methodology_**

Economic growth has very much picked up in most countries in Africa over the past decade and a half. This has led to three interrelated questions: Whence the apparent growth turnaround? Will it be sustained long term? And has it been inclusive enough? The answers to all three depend to varying degrees on the nature and scale of structural transformation that economies of the region might have been undergoing. In particular, whether or not the current growth episode would continue for many more years to come and whether it has been and will be inclusive enough will very much depend on whether it is driven by productivity enhancing structural change of the kind that McMillan and Rodrik (2011) credit for the East Asian growth miracle of the 1980s and 1990s. Does the growth turnaround in Africa reflect the onset of that kind of change? Or, does it have little to do with long term trends in productivity or any lasting change in the structure of employment and production? Currently the balance of opinion seems to be that Africa is not undergoing that kind of structural change and may not therefore necessarily sustain current growth rates much longer especially in the event of adverse commodity price developments.<sup>2</sup> This is no doubt a question that should be answered ultimately case by case at the level of the individual country before any generalization can be made about it meaningfully on a regional scale. This paper seeks to address it with respect to the experience of Uganda, which has been one of the fastest and most consistently growing economies of the region and which, according to Hauseman et al. (2014), has seen its per capita income double over the last two decades. Uganda is also one of the very few countries in which the kind of household and establishment level information needed to investigate the question rigorously enough is available to the public. These include data from the Uganda Business Register (UBR) that the Government of Uganda has maintained since year 2000 and those from the business survey program of the central statistical office, namely, Uganda Business Inquiry (UBI). The paper uses these two sources in order to assess if Uganda’s economy has been undergoing the kind of structural change that would sustain over the long term the pace of GDP growth observed over the past decade and a half.

The key questions motivating the analysis reported in the paper include the following. Is there evidence that there was significant and sustained reallocation of labor to sectors of the economy where labor is more productive on average and at the margin? If there is, which were (the less productive) sectors of origin of the reallocation and which were the (more productive) destination sectors? What has triggered the reallocation? And what would make us think that the reallocation would be sustained long enough, or that it signaled the economy was taking off into a process of self‐sustaining growth? Or could it be

> 22 The most categorical statement of this position is probably Rodrik (2014) but that assessment is also implicit in McMillan and Hartgen (2014) and Resnick and Thurlow (2014).

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