Document Type

Conference Paper


This paper offers a re-interpretation of the drivers of structural change in Australia from federation until the outbreak of World War II. The broad story of structural change is that manufacturing increased its relative share of both output and employment while the share of the farm sector and mining contracted. The large tertiary sector, including construction, oscillated around its mean. The conventional wisdom is that these shifts were largely the result of government policy, particularly the increase in trade barriers that stimulated import substitution by manufacturers. However, if the unit of analysis is the firm rather than the economy then a wider range of possibilities come into view. We contend that profit maximizing firms responded to changing relative profits between and within sectors that shifted in response to more sources of stimuli than tariffs and subsidies. These included exogenous shifts in consumer preferences and a number of changes on the supply side: the adoption of new technologies, changing factor proportions, and greater specialization in manufacturing and services generating positive experience effects.