In some developing regions, per capita incomes will begin to converge with those in high-income countries

As average incomes of developing countries converge to OECD levels, demand for services in the developing world is likely to increase faster than in high income countries because services tend to have higher income elasticities than agricultural and manufactured products.

Some of this catch-up will be moderated by growing demand for health and public services by the aging OECD populations, but overall, faster growth in low and middle income countriesand particularly China and Indiais likely to translate into more pronounced shift of production towards service activities.

In order to accommodate this growing share of services in total output, the contribution of other sectors to aggregate production will decrease. For developing countries, the expansion is likely to come at the cost of agricultural output: Chinas agricultural output share is likely to decrease by more than one-half, while Indias agricultural production share could decline by one-third.

This is driven by sustained large increases in manufacturing productivity in both countries, which underpin their leading growth performance. The changing sectoral structure of Chinese and Indian economies is likely to have profound effects on factor returns. Because services tend to be more skill intensive than other sectors, increasing demand for services is likely to exert upward pressure on skilled wages.

In 2005, 79 and 91% of total skilled wage bill in China and India is paid to service sector workers, and these shares could rise further by 2030. Demand for skilled workers over the coming decades is likely to be particularly acute in China, where slower population growth will add to the relative scarcity of the white-collar employees.

Productivity growth, changing sectoral structure, and widening skill premiums lead to important changes in international competitiveness of developing countries. Low and middle income nations solidify their comparative advantage in exports of manufactured goods, which rise from 79 to 88 % of total merchandise exports between 2005 and 2030 .The trend is even more pronounced in China and India, which benefit from a TFP growth significantly above the developing country average.

 In our scenario, 97% of Chinese and 98 % of Indian merchandise exports are likely to originate from manufacturing sectors. As high income countries lose competitiveness in the manufacturing sector due to their lower productivity, the share of manufacturing products in their total exports is likely to decline significantly. Manufacturing sectors, these linkages are likely to become even stronger in 2030.