Globalization, structural change, and economic growth Dani Rodrik - - PowerPoint PPT Presentation
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
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."
Importance of mis-allocation Recent work focuses on within-industry
Older tradition of dual-economy models focused
This work reminiscent of that older tradition and
MWI ETH ZMB GHA KEN SEN NGA BOL IND CHN PHL IDN BRA PER THA COL CRI VEN MEX TUR CHL ARG MYS KOR MUS ZAF DNK TWN ESP UKM JPN SWE ITA NLD FRA SGP HKG USA
Component plus residual 7 8 9 10 11 lnlabprod05
Relationship between inter-sectoral productivity gaps and income levels
50 100 7 8 9 10 11 ln_sumlprod In %, = (agr_lprod_kppp00/non_agr_lprod_kppp00)*100 Fitted values
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1950 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 19921993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200520 40 60 80 100 In %, = (agr_lprod_kppp00/non_agr_lprod_kppp00 7 8 9 10 11 ln_sumlprod IND FRA PER
Relationship between economy-wide labor productivity (horizontal axis) and the ratio of agricultural productivity to non-agricultural productivity (percent, vertical axis)
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
= = −
n i t i t i t i n i k t i t
, , , ,
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.
Productivity decomposition in Latin America across different periods (annual growth rates)
0.005 0.01 0.015 0.02 0.025 0.03 0.035 0.04 0.045
1990 - 2005 1975 - 1990 1950 - 1975
Sectoral productivity growth Structural change
Data from Pages, Carmen ed., The Age of Productivity, Inter-American Development Bank, Washington, D.C., 2010.
0.01 0.02 0.03 0.04 0.05 HI ASIA AFRICA LAC within structural
Decomposition of productivity growth by country group, 1990-2005
Productivity growth within sectors Productivity growth due to structural change
agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man minpu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt
1 2 3 Log of Sectoral Productivity/Total Productivity
.1 .2 Change in Employment Share (∆Emp. Share) 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)
β = -2.6866; t-stat = -1.17
Correlation Between Sectoral Productivity and Change in Employment Shares in Latin America (1990-2005)
agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt agr con cspsgs fire man min pu tsc wrt
1 2 3 Log of Sectoral Productivity/Total Productivity
.1 Change in Employment Share (∆Emp. Share) 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
β = 3.5826; t-stat = 2.20
Correlation Between Sectoral Productivity and Change in Employment Shares in Asia (1990-2005)
Asia Latin America
agr con cspsgs fire man min pu tsc wrt
.5 1 1.5 2 Log of Sectoral Productivity/Total Productivity
.02 .04 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 Timmer and de Vries (2009)
β = -7.0981; t-stat = -1.21
Correlation Between Sectoral Productivity and Change in Employment Shares in Argentina (1990-2005)
agr con cspsgs fire man min pu tsc wrt
1 2 Log of Sectoral Productivity/Total Productivity
.05 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 Timmer and de Vries (2009)
β = -2.2102; t-stat = -0.17
Correlation Between Sectoral Productivity and Change in Employment Shares in Brazil (1990-2005)
agr con cspsgs fire man min pu tsc wrt
2 4 6 Log of Sectoral Productivity/Total Productivity
.05 .1 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
β = -12.2100; t-stat = -1.06
Correlation Between Sectoral Productivity and Change in Employment Shares in Nigeria (1990-2005)
agr con cspsgs fire man min pu tsc wrt
1 2 3 Log of Sectoral Productivity/Total Productivity
.1 .2 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
β = -10.9531; t-stat = -3.25
Correlation Between Sectoral Productivity and Change in Employment Shares in Zambia (1990-2005)
agr con cspsgs fire man min pu tsc wrt
1 2 Log of Sectoral Productivity/Total Productivity
.02 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 Timmer and de Vries (2009)
β = 35.2372; t-stat = 2.97
Correlation Between Sectoral Productivity and Change in Employment Shares in India (1990-2005)
agr con cspsgs fire man min pu tsc wrt
1 2 3 Log of Sectoral Productivity/Total Productivity
.1 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 Timmer and de Vries (2009)
β = 5.1686; t-stat = 1.27
Correlation Between Sectoral Productivity and Change in Employment Shares in Thailand (1990-2005)
Some countries have more “surplus labor” in
Role of comparative advantage: primary
Labor market rigidity: large hiring/firing costs
Trade/industrial/currency policies have: – Not encouraged new tradable activities sufficiently – Exposed tradables to import competition too early and excessively
SGP HKG USA UKM SWE NLD DNK FRA ITA JPN ESP ARG TWN VEN ZAF MUS KOR CHL MEX BRA MYS CRI COL PER BOL PHL TUR NGA IDN ZMB CHN THA GHA SEN IND KEN MWI ETH
.02 Component plus residual .2 .4 .6 .8 1 Labor share of agriculture, 1990
SGP HKG USA UKM SWE NLD DNK FRA ITA JPN ESP ARG VEN ZAF MUS KOR CHL MEX BRA MYS CRI COL PER BOL PHL TUR NGA IDN ZMB CHN THA GHA SEN IND KEN MWI ETH
.02 .04 Component plus residual .2 .4 .6 .8 1 Labor share of agriculture, 1990
Association between the initial labor share in agriculture and the contribution
unconditional conditional
JPN HKG KOR ITA SWE TWN UKM USA SGP PHL TUR CHN ESP FRA IND MUS THA MEX MYS DNK NLD ZAF BRA SEN KEN CRI IDN ETH COL ARG GHA PER CHL BOL ZMB MWI VEN NGA
Component plus residual .2 .4 .6 .8 1 index_exp_rawmat
Partial association between the share of primary products in exports and the contribution of structural change to growth
JPN DNK SWE NLD FRA UKM ITA NGA ESP USA ZMB MEX TWN SGP KOR HKG TUR PER ARG SEN VEN BRA CRI ZAF BOL KEN GHA CHL MWI MYS COL THA ETH PHL CHN IDN IND MUS
.02 Component plus residual
.5 1 underval
Partial association between an index of currency “undervaluation” and the contribution of structural change to growth
Partial association between an index of labor market rigidity and the contribution of structural change to growth
HKG USA SGP DNK NGA UKM MYS COL THA JPN KEN MUS CHL MWI ARG ZMB GHA ETH PHL IND CHN ZAF TUR SWE KOR ITA PER CRI IDN MEX NLD BRA ESP FRA SEN VEN BOL
.02 Component plus residual .2 .4 .6 .8 Employment rigidity index (0=less rigid, 1=more rigid)
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