International trade has supported economic convergence and poverty reductions in many emerging market economies. Nonetheless, there are significant challenges during the transition towards a more open economy. Reallocations of resources and structural change are one key source of aggregate productivity improvements, but they will come with adjustment costs. Less competitive firms and sectors may decline, while more competitive sectors will have to adapt and seize new opportunities from trade and global value chains. Some workers will move to more productive firms, change occupations, sectors or even location. Non-trade policies can help to smooth these challenges and support workers seize new opportunities. This paper reviews the existing literature on how policy reforms have managed to support structural change of economies.
