Appendix B: Structural change analysis
Structural change indices (SCIs) are a standard measure of the rate of structural
change. In this appendix the methodology for deriving structural change indices
is explained.
SCIs are derived by adding half the sum of the absolute value of changes in the
percentage shares of output (or employment) of different industry groups for a
given period:
SCI 
1 n
 xi,t  xi,t  j
2 i 1
x
where i ,t is the average share of industry (or state) in i in the economy in the
period j to t .
This provides a measure of the extent to which industries are growing at
different rates, which results in compositional shifts — that is, structural change.
Where changes in shares are small, the value of the index is small, indicating that
there has been little structural change. Conversely, where changes in shares are
large, the index registers a higher value, indicating more extensive structural
change. SCIs do not measure changes in the overall level of activity or
employment — the index would be zero if all industries were growing (or
declining) at the same rate. Any changes in the output or employment shares of
the different industries used to compile the SCIs reflect the ‘net’ impact of the
many influences on the composition of output and employment — some of
which pull in different directions.
B.1
Variations in the Rate of Structural Change for
Victoria
The derivation of SCIs for Victoria over the past two decades for output and
employment is presented in the tables below.
APPENDIX B: STRUCTURAL CHANGE ANALYSIS
267
Table B.1
Industry
Output by industry for Victoria
Value added ($ million)
Industry Output Share (per cent)
Change (percentage point)
1990
2000
2010
1990
2000
2010
1990-2000
2000-2010
Agriculture
4 778
6 343
6 479
3.3
3.2
2.6
-0.1
-0.6
Mining
9 898
7 897
5 982
6.8
4.0
2.4
-2.8
-1.6
26 495
30 545
30 801
18.3
15.5
12.3
-2.8
-3.2
5.7
5.4
Manufacturing
Services
103 424
151 815 206 188
71.5
77.2
82.7
Total
143 469
195 325 249 450
100
100
100
SCI
1990-2000
2000-2010
5.7
5.3
Source: VCEC.
Table B.2
Industry
Employment by industry for Victoria
Employed (‘000)
Industry Employment Share (per cent)
Change (percentage point)
1990
2000
2010
1990
2000
2010
1990-2000
2000-2010
112
91
81
5.5
4.0
2.8
-1.4
-1.2
7
6
10
0.3
0.3
0.3
-0.1
0.1
353
357
312
17.2
15.8
10.9
-1.5
-4.9
Services
1 580
1 810
2 460
77.0
80.0
85.9
3.0
6.0
Total
2 052
2 264
2 862
100
100
100
Agriculture
Mining
Manufacturing
SCI
1990-2000
2000-2010
3.0
6.1
Source: VCEC.
268
VICTORIAN MANUFACTURING: MEETING THE CHALLENGES