## Rethinking Development ## Source details **Canonical URL:** [Rethinking Development](https://www.imf.org/en/publications/fandd/issues/2026/09/rethinking-development-gordon-hanson) ## Other formats - [Markdown version](/en/publications/fandd/issues/2026/09/rethinking-development-gordon-hanson/index.md) - [Structured JSON version](/en/publications/fandd/issues/2026/09/rethinking-development-gordon-hanson/index.json) - [Bundle manifest](/en/publications/fandd/issues/2026/09/rethinking-development-gordon-hanson/bundle-manifest.json) ## Bibliographic details - Authors: Gordon Hanson, Dani Rodrik, ROHAN SANDHU - Published: August 27, 2026 --- ### Overview - The future of economic development will be very different from its past. - National security and geopolitical goals loom larger in government policy agendas; export-oriented industrialization has lost its luster as a trusted vehicle for economic growth and job creation. - Climate change and the renewables revolution both threaten and create new possibilities for structural change. - The central challenge: increase productivity in nontraded activity jobs—mostly services—that do not require a standard college education. ### Patterns of employment - Projections (based on current demographic, schooling, trade, and industrialization trends, excluding China) suggest: - Most workers will not have a college education. - More than three-quarters will be in occupations not directly exposed to the international economy (through trade or “offshorability”). - About two-thirds of the developing world’s labor force will be in occupations that do not require a college education and are not tradable (currently very low productivity, predominantly informal jobs such as street vending, domestic and food service work, and subsistence farming). - Implication: Conventional education investment and export-oriented industrialization cannot generate large numbers of good jobs for most workers in developing economies. ### Nontraded services: why they matter - Nontraded services employ the bulk of workers in developing economies and are dominated by smaller firms. - Manufacturing remains important (productivity and learning spillovers, investment attraction, national security) but has become substantially more capital intensive and is no longer the employment generator it once was. - Productivity growth concentrated in industrial enclaves does not produce broad-based development unless it creates jobs for the broader population. - The policy focus should shift toward an updated form of industrial policy tailored to nontraded services. ### Two-legged strategy: supply and demand of labor - Supply-side (workforce development): - For most workers, the transition into the labor market will be a direct move from secondary school to the world of work. - Secondary education in many countries does little to raise individual earning power; classes are often not oriented toward occupational skills or soft skills employers want. - Many developing economies are making or considering making upper secondary education (ages 15–18) mandatory—this opens a window for career and technical training. - Evidence exists that sub-baccalaureate career and technical programs can train workers for good jobs in sectors like health care, construction, personal services, and IT support and infrastructure (Hanson 2026). - Digitization of education and employment data enables design, testing, and implementation of programs tailored to regional labor market needs. - Demand-side (productivity of local firms): - Industrial policies should be adapted to the smaller firms that dominate services. - Encourage large firms to invest in capabilities of suppliers and small enterprises (e.g., platform companies assisting retail and food service firms and gig workers with marketing and technical assistance). - Governments can nudge large employers and work with exporters, mining operators, and large retailers to expand and productively upgrade local supplier networks. - Provide micro and small enterprises with direct productivity-enhancing public resources (loans, management training, technology provision) targeted to productivity constraints. - Evidence suggests carefully targeted management training, marketing assistance, and provision of technology can boost productivity and employment in smaller informal enterprises (Rodrik and Sandhu 2025). ### Learning, experimentation, and program design - Key messages: - Productive jobs are central to economic development; technology, innovation, exports, and growth are inadequate if they benefit only a narrow workforce segment. - Success depends largely on improving productivity in nontraded services; without it, development will stall. - Governments cannot reliably pick winners ex ante; uncertainty should be built into program design. - Favor collaborative, iterative approaches that are open to revision and focus on removing constraints through public support rather than top-down fiscal subsidies with fixed parameters. - Emphasize culture of learning and experimentation in policy implementation. ### Policy recommendations (summarized) - Reorient development strategy toward productivity growth in nontraded services where most jobs exist. - Reform secondary education to incorporate career and technical training aligned with employer needs and soft skills, leveraging mandatory upper secondary education (ages 15–18) where applicable. - Use digitized education and employment data to design and test programs adapted to regional labor market demands. - Design industrial policies for small service firms: incent large firms/platforms to upgrade suppliers and gig workers; provide targeted public resources (management training, marketing assistance, technology) to micro and small enterprises. - Adopt iterative, evidence-driven policy frameworks that allow experimentation and revision instead of rigid, top-down programs. _GORDON HANSON, DANI RODRIK, ROHAN SANDHU — F&D Magazine, September 2026. Published on August 27, 2026._ --- ## Content in this bundle - **Rethinking Development** - [Rethinking Development (Markdown version)](/-/media/files/publications/fandd/article/2026/09/hanson.pdf.md){rel="alternate" type="text/markdown"} - [Rethinking Development (PDF)](/-/media/files/publications/fandd/article/2026/09/hanson.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2026/09/rethinking-development-gordon-hanson_