Structural Change and Productivity Growth --in Latin America, Asia, and Turkey
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Transcript of Structural Change and Productivity Growth --in Latin America, Asia, and Turkey
Structural Change and Productivity Growth --in Latin America, Asia, and TurkeyDani Rodrik
Merih Celasun Memorial Lecture
December 2010
Structuralism is back
Not in the sense of distrust of markets or underestimation of the role of incentives
But greater appreciation of the role that “economic structure” plays in facilitating and constraining economic development
As evidenced by work on: Inter-sectoral and inter-firm gaps in productivity
“dualism” The export-diversification challenge Innovation as “self-discovery” rather than R&D Structural change as engine of development
Developing economies are not just radially-shrunk versions of advanced economies
Labor productivity gaps: Turkey
Labor productivity in relation to average productivity, 2005
0
1
2
3
4
5
6
agr min man pu con wrt tsc fire cspsgs
Dualism within sectors
Source: McKinsey Global Institute (2003)
Inter-sectoral productivity gaps diminish over the course of development
Coefficient of variation of (log) sectoral labor productivity against per-capita income
INDBOL
PHL
IDN
PER
TUR
COL
THA
BWA
BRA
MEX
VEN
CRI
MYS
CHL
ARGKOR
TWN
ESPITA
UKM
SWE
FRA
JPN
NLD
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USA
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How does inter-sectoral structural change contribute to overall productivity growth?
“within” “structural change”
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The Latin American paradox
Based on data from Carmen Pages, ed., The Age of Productivity, IDB, 2010.
Productivity decomposition in Latin America across different periods(annual growth rates)
-0.01 -0.005 0 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 productivitygrowth
Structural change
Implications
Post-1990 growth constrained by adverse structural change “growth reducing structural change”
Consequence of economic liberalization: positive within effects, negative overall effects? Empirical work on productivity consequences of trade
liberalization within manufacturing What happens if displaced labor ends up in sectors
with even lower productivity Informality, traditional services, etc.
A more detailed, comparative look: the dataLatin America Asia High-income
ARG HKG DNKBOL IDN ESPBRA IND FRACHL KOR ITACOL MYS JPNCRI PHL NLDMEX SGP SWEPER THA UKMVEN TWN USA
Sector Full name 1 AGR Agriculture 2 MIN Mining 3 MAN Manufacturing 4 PU Public utilities 5 CON Construction 6 WRT Wholesale & retail trade 7 TSC Transport & communication 8 FIRE Finance & business services 9 CSPSGS Government & public services
Marcel P. Timmer and Gaaitzen J. de Vries (2007), “A Cross-Country Database For Sectoral Employment And Productivity In Asia And Latin America, 1950-2005,” Groningen Growth and Development Centre Research Memorandum GD-98, Groningen: University of Groningen, August 2007.
TUR not included in this data set. I used data from TUIK to include TUR in the analysis.
+ TUR
Questions
Is this something due to post-1990 global conjuncture? How does Asia compare? Where does Turkey stand in comparison to Latin
America and Asia? How can we explain these patterns?
Basic resultsDecomposing productivity change, 1990-2005
-0.015 -0.01 -0.005 0 0.005 0.01 0.015 0.02 0.025 0.03 0.035 0.04
HI
ASIA
LAC
sectoral productivity growth
structural change
region overall productivity growthsectoral productivity
growth structural change
LAC 1.35% 2.24% -0.88%
ASIA 3.33% 2.81% 0.52%
HI 1.46% 1.54% -0.09%
Basic results (weighted data)Decomposing productivity growth, 1990-2005 (weighted data)
-0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%
HI
ASIA
LAC
sectoral productivity growth
structural change
region overall productivity growth sectoral productivity growth structural change
LAC 1.08% 1.05% 0.03%
ASIA 3.28% 2.12% 1.16%
HI 1.81% 1.92% -0.11%
Countries ranked by:
Contribution of sectoral: Contribution of structural change:country region total within structuralKOR ASIA 0.038972 0.052947 -0.013975PER LAC 0.034072 0.038536 -0.004465CHL LAC 0.029252 0.038205 -0.008953SGP ASIA 0.037079 0.037853 -0.000775MYS ASIA 0.040816 0.035871 0.004946TWN ASIA 0.039907 0.03448 0.005427BOL LAC 0.008808 0.033657 -0.024849IND ASIA 0.042316 0.032409 0.009906VEN LAC -0.003542 0.032048 -0.03559ARG LAC 0.023534 0.029429 -0.005896HKG ASIA 0.03272 0.020182 0.012538TUR TURKEY 0.031586 0.017353 0.014233IDN ASIA 0.027799 0.017228 0.010571THA ASIA 0.030511 0.013835 0.016676CRI LAC 0.0125 0.008725 0.003775MEX LAC 0.01067 0.008339 0.002331PHL ASIA 0.009455 0.00809 0.001365BRA LAC 0.004444 0.006957 -0.002513COL LAC 0.001849 0.00529 -0.00344ETH AFRICA 0.018733 0.003935 0.014798
country region total within structuralTHA ASIA 0.030511 0.013835 0.016676ETH AFRICA 0.018733 0.003935 0.014798TUR TURKEY 0.031586 0.017353 0.014233HKG ASIA 0.03272 0.020182 0.012538IDN ASIA 0.027799 0.017228 0.010571IND ASIA 0.042316 0.032409 0.009906TWN ASIA 0.039907 0.03448 0.005427MYS ASIA 0.040816 0.035871 0.004946CRI LAC 0.0125 0.008725 0.003775MEX LAC 0.01067 0.008339 0.002331PHL ASIA 0.009455 0.00809 0.001365SGP ASIA 0.037079 0.037853 -0.000775BRA LAC 0.004444 0.006957 -0.002513COL LAC 0.001849 0.00529 -0.00344PER LAC 0.034072 0.038536 -0.004465ARG LAC 0.023534 0.029429 -0.005896CHL LAC 0.029252 0.038205 -0.008953KOR ASIA 0.038972 0.052947 -0.013975BOL LAC 0.008808 0.033657 -0.024849VEN LAC -0.003542 0.032048 -0.03559
Looking closer at “structural change” term: LAC
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Log
of S
ecto
ral P
rodu
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ity/T
otal
Pro
duct
ivity
-.2 -.1 0 .1 .2Change in Employment Share
(Emp. Share)
Fitted values
*Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Authors' calculations with data from Timmer and de Vries (2007)
= -2.6866; t-stat = -1.17
Correlation Between Sectoral Productivity andChange in Employment Shares in Latin America (1990-2005)
Looking closer at “structural change” term: Asia
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Log
of S
ecto
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rodu
ctiv
ity/T
otal
Pro
duct
ivity
-.2 -.1 0 .1Change in Employment Share
(Emp. Share)
Fitted values
*Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Authors' calculations with data from Timmer and de Vries (2007)
= 3.3202; t-stat = 2.04
Correlation Between Sectoral Productivity andChange in Employment Shares in Asia (1990-2005)
Selected countries: Argentina
agrcon
cspsgsfire
man
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pu
tsc
wrt
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11.
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Log
of S
ecto
ral P
rodu
ctiv
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otal
Pro
duct
ivity
-.06 -.04 -.02 0 .02 .04Change in Employment Share
(Emp. Share)
Fitted values
*Note: Size of circle represents employment share in 1990**Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Author's calculations with data from Timmer and de Vries (2007)
= -7.0981; t-stat = -1.21
Correlation Between Sectoral Productivity andChange in Employment Shares in Argentina (1990-2005)
Selected countries: Brazil
agr
con
cspsgs
fire
man
min
pu
tsc
wrt-10
12
Log
of S
ecto
ral P
rodu
ctiv
ity/T
otal
Pro
duct
ivity
-.1 -.05 0 .05Change in Employment Share
(Emp. Share)
Fitted values
*Note: Size of circle represents employment share in 1990**Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Author's calculations with data from Timmer and de Vries (2007)
= -2.2102; t-stat = -0.17
Correlation Between Sectoral Productivity andChange in Employment Shares in Brazil (1990-2005)
Selected countries: India
agr
concspsgs
fire
man
min
pu
tsc
wrt
-10
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Log
of S
ecto
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rodu
ctiv
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otal
Pro
duct
ivity
-.04 -.02 0 .02Change in Employment Share
(Emp. Share)
Fitted values
*Note: Size of circle represents employment share in 1990**Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Author's calculations with data from Timmer and de Vries (2007)
= 35.2372; t-stat = 2.97
Correlation Between Sectoral Productivity andChange in Employment Shares in India (1990-2005)
Selected countries: Thailand
agr
con
cspsgsfire
man
min
pu
tsc
wrt
-10
12
3
Log
of S
ecto
ral P
rodu
ctiv
ity/T
otal
Pro
duct
ivity
-.2 -.1 0 .1Change in Employment Share
(Emp. Share)
Fitted values
*Note: Size of circle represents employment share in 1990**Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Author's calculations with data from Timmer and de Vries (2007)
= 5.1686; t-stat = 1.27
Correlation Between Sectoral Productivity andChange in Employment Shares in Thailand (1990-2005)
How does Turkey compare?Decomposition of productivity growth, Turkey
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%
1990-2005
1988-2008
within
structural change
Selected countries: Turkey
agr
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fire
man
min
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50
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Log
of S
ecto
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rodu
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otal
Pro
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-.2 -.1 0 .1Change in Employment Share
(Emp. Share)
Fitted values
*Note: Size of circle represents employment share in 1988**Note: denotes coeff. of independent variable in regression equation: ln(p/P) = + Emp. ShareSource: Authors' calculations with data from the Turkish Statistical Institute
= 2.9138; t-stat = 1.14
Correlation Between Sectoral Productivity andChange in Employment Shares in Turkey (1988-2008)
Some intermediate conclusions
Structural change in LAC contributed negatively (unweighted) or very little (weighted) to labor productivity growth compared to what happened in ASIA
These economies are supposed to have become more “open”: yet in all cases the employment share of tradables (the sectors experiencing the most rapid productivity growth) has been shrinking. Some of this is normal, and associated with increase in incomes But also signs that some of it is pre-mature
Turkey looks decidedly more “Asian” in terms of the contribution of structural change to overall productivity growth
Explaining differences across countries Richer countries may have less room for productivity-
enhancing structural change Labor market rigidities may prevent expansion of more
productive sectors Trade/industrial/currency policies may:
play a role in encouraging/discouraging new tradable activities expose tradables to import competition too early and excessively
Comparative advantage may
encourage specialization in primary products instead of manufacturing with limited potential to absorb labor
Income differencesAverage economy-wide labor productivity, 2000 PPP $
0
10000
20000
30000
40000
50000
60000
ASIA HI LAC TURKEY
1990
2005
Inter-sectoral productivity gaps Dispersion of sectoral labor productivity, 2005
(coefficient of variation of log sectoral productivites)
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
HKG IDN IND KOR MYS PHL SGP THA TWN ARG BOL BRA CHL COL CRI MEX PER VEN TUR
Asia average: 0.098
LAC average: 0.098
Turkey: 0.080
Structure of exports
JPN
HKG
KOR
ITASWE
UKMUSASGPPHL
TUR
ESPFRA
IND
THA
MEX
MYS
DNKNLD
BRA
CRIIDN
COL
ARG
PER
CHL
BOL
VEN
-.04
-.03
-.02
-.01
0.0
1C
omp
onen
t plu
s re
sidu
al
0 20 40 60 80Exp_rawmat
t-stat: -3.38
The real exchange rate
JPN
DNKSWE
NLDFRA
UKM
ITA
ESP
USA
MEX
SGP
KOR
HKG
TURPER
ARG
VEN
BRA
CRI
BOL
CHLMYSCOL
THA
PHL
IDN
IND
-.02
-.01
0.0
1.0
2C
omp
onen
t plu
s re
sidu
al
-1 -.5 0 .5 1underval
t-stat: 3.12
Rigidity of labor laws
USA
HKG
SGP
DNK
UKM
COLMYS
THA
JPNCHL
ARG
PHL
IND
TUR
SWEITA
KOR
CRIPERIDN
MEXNLD
BRAESPFRA
VEN
BOL
-.03
-.02
-.01
0.0
1C
omp
onen
t plu
s re
sidu
al
0 20 40 60 80Employment rigidity index (0=less rigid, 100=more rigid)
t-stat: -1.70
Concluding comments
Structural transformation is the key to economic development
Structural transformation is not an automatic process
We need to avoid both the dirigiste and the market fundamentalist traps pragmatism rather than preconceived ideologies strategic collaboration between government and the private
sector Ingredients:
Institutionalized dialogues, carrots, and sticks