Abstract

This paper revisits the relationship between per capita income and technological-intensity structural transformation in manufacturing. It asks whether the income–cosphi relationship is better described by heterogeneous nonlinearity and smooth transition zones rather than by a common linear slope or hard income thresholds. Using a cross-country panel for 2014–2022, with a main sample of 482 observations from 65 countries and an expanded sample of 550 observations from 66 countries, the study employs two-way fixed effects as a benchmark, spline fixed-effects models as the main specification, threshold fixed-effects models as a heuristic tool, and a set of robustness checks including balanced versus unbalanced panels and Difference GMM. The results show that linearity is too restrictive. Nonlinear evidence is stronger in the main sample, the shape of the relationship differs between developed and developing economies, and threshold models do not support sharp breakpoints. Mechanism analysis further suggests that R&D conditions the nonlinear relationship more strongly than FDI. The paper contributes by reframing technological structural transformation as a nonlinear, heterogeneous, and conditional process rather than a universal income-threshold story.