The main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change, broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture, manufacturing and services. Using the GGDC 10‐Sector Database, this paper first presents the empirical facts associated with structural change in different regions of the world – that is Europe and the USA, Asia, Latin America, and Africa – then reviews four determinants of structural change: (i) changes in income, (ii) changes in relative (sectoral) prices, (iii) changes in input–output linkages and (iv) changes in comparative advantage(s) via globalization and trade.

Shift‐share analysis is a decomposition technique widely used in regional studies to quantify an industry‐mix effect and a competitive effect on the growth of regional employment (or any other relevant variable) relative to the national average. This technique has always been subject to criticism for its lack of theoretical basis. This paper presents a critical assessment of the methods suggested by Dunn and Esteban‐Marquillas and proposes a new shift‐share method, which separates out the two effects unambiguously. By way of illustration, we provide an application to manufacturing employment in the Belgian provinces between 1995 and 2007.

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