Globalization, structural change, and economic growth

Transcription

1 Globalization, structural change, and economic growth Dani Rodrik April 2011 Based on a paper with the title Globalization, Structural Change, and Productivity Growth, authored jointly with Margaret McMillan (IFPRI). I acknowledge financial support from IFPRI and a joint IL-WTO project on "Making Globalization Socially Sustainable."

2 Productivity growth through structural change Importance of mis-allocation Recent work focuses on within-industry misallocation Older tradition of dual-economy models focused on broad structural change This work reminiscent of that older tradition and complements more disaggregated research

3 Productivity gaps are large in developing countries

4 Productivity gaps diminish over the course of development Component plus residual MWI ETH KEN ZMB GHA SEN NGA BOL IND CHN THA IDN BRA COL PER PHL VEN MYS KOR TWN NLD DNK HKG MEX TURCHL ARG ZAF UKM SGP ESP JPN USA CRI MUS ITA SWE FRA lnlabprod05 Relationship between inter-sectoral productivity gaps and income levels

5 Growth requires both new activities and ongoing structural change ln_sumlprod In %, = (_lprod_kppp00/non lprod_kppp00)*100 Fitted values In %, = (_lprod_kppp00/non lprod_kppp ln_sumlprod IND PER FRA Relationship between economy-wide labor productivity (horizontal axis) and the ratio of icultural productivity to non-icultural productivity (percent, vertical axis)

6 Data sources Start from Groningen Growth and Development Center (GGDC) data base, which provides employment and real valued added statistics for 27 countries disaggregated into 10 sectors (Timmer and de Vries, 2007; 2009) We converted local currency value added at 2000 prices to dollars using 2000 PPP exchange rates. Complement with data from national sources for 11 additional countries (China, Turkey, and several African countries) For the most part, VA comes from national income accounts, while level and structure of employment come from population censuses (and other household surveys) Since employment data are not based on labor force or industrial surveys (save for extrapolation purposes), coverage of informal sector should be less problematic than otherwise

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8 Sectors

9 Decomposing labor productivity growth Y = θ t i t k yi t + yi t θ,,, i, t i= n i= n within structural change Y refers to aggregate labor productivity, y is sectoral labor productivity, θ is employment share, Δ is the first-difference operator, i indexes sectors, t -k and t stand for initial and final years.

10 Productivity decomposition in Latin America Productivity decomposition in Latin America across different periods (annual growth rates) Sectoral productivity growth Structural change Data from Pages, Carmen ed., The Age of Productivity, Inter-American Development Bank, Washington, D.C., 2010.

11 and across regions LAC Productivity growth within sectors AFRICA within ASIA HI structural Productivity growth due to structural change Decomposition of productivity growth by country group,

12 The actual numbers

13 Country details

14 Patterns of structural change: Asia versus Latin America Log of Sectoral Productivity/Total Productivity man Correlation Between Sectoral Productivity and Change in Employment Shares in Asia ( ) β = ; t-stat = 2.20 man man man min pu pu fire pu min min fire pu min pu fire min man pu min tsc man pu fire man wrt con man fire cspsgs fire tsc tsc tsc man fire fire con fire man wrt mintsc tsc tsc cspsgs wrt con con tsc cspsgs wrt cspsgs wrt wrt cspsgs wrt wrt cspsgs cspsgs wrt cspsgs min cspsgs wrt con con con con con fire Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Latin America ( ) β = ; t-stat = min pu min min pu con min min pu pu pu pu min minfire fire tsc tsc man tsc man con fire man man man man tsc putsctsc mancon cspsgs tsc man con con tscfire con fire wrt wrt cspsgs cspsgs fire cspsgs wrt fire cspsgs fire wrt cspsgs cspsgs con cspsgs fire cspsgs wrt mincon wrt wrt wrt con pu wrt Change in Employment Share ( Emp. Share) Change in Employment Share ( Emp. Share) Fitted values Fitted values *Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009) and China's National Bureau of Statistics *Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009) Asia Latin America

15 Argentina Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Argentina ( ) β = ; t-stat = man Change in Employment Share ( Emp. Share) min pu con wrt tsc fire cspsgs Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009)

16 Brazil Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Brazil ( ) β = ; t-stat = man Change in Employment Share ( Emp. Share) con pu min fire tsc wrt cspsgs Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009)

17 Nigeria Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Nigeria ( ) β = ; t-stat = wrt min fire tsc pu mancon cspsgs Change in Employment Share ( Emp. Share) Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Nigeria's National Bureau of Statistics and ILO's LABORSTA

18 Zambia Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Zambia ( ) β = ; t-stat = fire cspsgs min con pu man tsc wrt Change in Employment Share ( Emp. Share) Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from CSO, Bank of Zambia, and ILO's KILM

19 India Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in India ( ) β = ; t-stat = 2.97 cspsgs pu tsc min wrt con man Change in Employment Share ( Emp. Share) fire Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009)

20 Thailand Log of Sectoral Productivity/Total Productivity Correlation Between Sectoral Productivity and Change in Employment Shares in Thailand ( ) β = ; t-stat = 1.27 pu min tsc fire con man cspsgs Change in Employment Share ( Emp. Share) wrt Fitted values *Note: Size of circle represents employment share in 1990 **Note: β denotes coeff. of independent variable in regression equation: ln(p/p) = α + β Emp. Share Source: Authors' calculations with data from Timmer and de Vries (2009)

21 What s going on? Some possibilities: Some countries have more surplus labor in iculture than others Role of comparative advantage: primary products versus manufactures Labor market rigidity: large hiring/firing costs may prevent employment growth in dynamic sectors Trade/industrial/currency policies have: Not encouraged new tradable activities sufficiently Exposed tradables to import competition too early and excessively

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23 Large reservoir of excess labor helps, but only conditionally Component plus residual HKG TWN SGP SWE DNK FRA ITA JPN ESP MUS MYS MEX CRI USA NLD ZAF BRA UKM COL ARG PER CHL KOR VEN TUR IDN PHL NGA BOL ZMB THA CHN IND GHA SEN KEN MWI ETH Component plus residual ZAF PER MUS NLD FRAESP MYS CRI CHL ARG BRA HKG SWE ITA COL DNK VEN MEX SGP USA UKM JPN KOR BOL PHL IDN NGA TUR ZMB GHA THA CHN IND SEN KEN ETH MWI Labor share of iculture, Labor share of iculture, 1990 unconditional conditional Association between the initial labor share in iculture and the contribution of structural change to growth

24 Comparative advantage in primary products is bad news HKG Component plus residual MUS ITA TWN TUR JPN SWE USA SGP ESP FRA THA MYS DNK ZAF NLD UKM CHN IND PHL MEX KOR KEN CRI BRA SEN IDN ETH GHA COL ARG PER CHL BOL ZMB MWI VEN NGA index_exp_rawmat Partial association between the share of primary products in exports and the contribution of structural change to growth

25 But policy can clearly help: currency undervaluation Component plus residual JPN DNK SWE NGA HKG TUR PER ARGCRI TWN SGP BRA NLD MEX FRA ESP ITA USA UKM VEN ZMB KOR SEN GHA THA ZAF KEN CHL MYS COL BOL MWI ETH PHL CHN IDN MUS underval IND Partial association between an index of currency undervaluation and the contribution of structural change to growth

26 But policy can clearly help: labor market rigidity Component plus residual HKG SGP USA NGA DNK THA MYS COL UKM MWI KEN ARG JPN MUS CHL ZMB GHA ETH CHN PHL IND TUR ZAF PER IDN NLD SWE CRI ITAMEX KOR BRA ESP FRA Employment rigidity index (0=less rigid, 1=more rigid) SEN VEN BOL Partial association between an index of labor market rigidity and the contribution of structural change to growth

27 Conclusions The presence of a large convergence gap ensures significant potential for rapid economic growth in developing world, regardless of what happens in the rich countries Fulfilling this potential requires ongoing process of diversification and structural change This process is not automatic, especially in countries with an initial comparative advantage in primary products It necessitates pragmatic, experimental policies that support new industries along with an external environment that supports, rather than misdirects, such efforts implications for WTO rules, and for WB/IMF policy advice