Abstract
The economic structure of countries, whether conceptualized as composition of relative sectoral output shares or as sectoral employment shares changes as countries develop. However, it is hard to find empirical studies using labor relocation across sectors along with urbanization to explain the economic growth in SAARC region. This study firstly uses Shift-share technique and finds that Maldives and India have experienced more structural change in terms of sectoral labor relocation than other countries such as Bangladesh, Nepal, and Pakistan. Further, by application of panel data estimation techniques it is found that structural change (i.e. labor relocation) is a not a statistically significant determinant of economic progress in SAARC – that hints towards possible labor market imperfections and socio-economic hindrances that deter labor movement across sectors. Our findings also confirm that capital per worker, urbanization, and trade openness ceteris paribus have positive influences on economic progress, though with different magnitudes. From policy perspective, labor relocation may be facilitated by promotion of appropriate skilling opportunities for migration across sectors.