Structural transformation is a reallocation of labor across sectors. In this paper I investigate the impact of structural transformation in an open economy on sectoral and aggregate productivity with a particular focus on the role of government. While there are potentially many sources of structural transformation I focus on labor reallocation induced by a windfall of revenue. Furthermore I only concentrate on windfall revenue arising from the export of natural resources (fuels ores and metals) although the entire analysis is applicable to other types of windfalls such as for example foreign aid remittances EU structural funds or war reparations.