Abstract

Structural transformation is widely considered a key driver of economic development; however, its contribution to multidimensional well-being remains unclear. This study analyzes the relationship between structural transformation and well-being using an unbalanced panel of 150 countries from 2000 to 2023. A multidimensional well-being index is constructed through principal component analysis, combining indicators of health, education, physician density, and security. The empirical strategy combines fixed-effects models with time controls and dynamic panel estimations using the System Generalized Method of Moments (System GMM) to address unobserved heterogeneity, persistence, and potential endogeneity. Fixed-effects estimates show that education and urbanization are positively associated with well-being, whereas industrialization and GDP per capita are not statistically significant. However, once dynamic persistence is incorporated, the significance of all structural variables disappears, while the lagged well-being indicator remains strongly significant, indicating a high degree of path dependence, although the overidentifying-restrictions test raises some concerns about the validity of the instruments used in this dynamic specification. These results suggest that the influence of structural transformation on well-being may be overstated in static specifications and that long-run well-being trajectories show a high degree of persistence. The findings highlight the importance of accounting for persistence and endogeneity when evaluating development outcomes. The dynamic estimates point to high persistence in well-being, but given the diagnostic concerns regarding instrument validity, these results should be interpreted as suggestive evidence of specification sensitivity rather than as conclusive evidence of path dependence or absence of structural effects.

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