ludovico alcorta development policy, statistics and research branch united nations industrial...
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Ludovico AlcortaDevelopment Policy, Statistics and Research Branch
United Nations Industrial Development Organization
International Economic AssociationPretoria, 3-4th July 2012
Industrial Structural Change, Growth Patterns and Industrial Policy
Outline• Research for Industrial Policy• Structural Change and Development• Industrial Structural Change Research at
UNIDO• Results and Findings• Applications to Industrial Policy• Extensions
2
Research for Industrial Policy
3
1. Providing:• Descriptive analysis on structural change and identifying manufacturing growth patterns
• Exploring relationships between patterns and stylized facts and their determinants
2. Embedding the analysis into a broader industrial policy assessment framework, which links the degree of economic attractiveness of industry to governments with aspects of the present and future feasibility of reaping those gains
Structural Change and Development• Definitions
– Long-term change in the composition of an aggregate (Syrquin, 2007)– Ability of an economy to constantly generate new dynamic activities characterized by
higher productivity and increasing returns to scale (Ocampo, 2005; UNDESA, 2006)
• The importance of (industrial) structural change for economic growth – Sustained economic growth is associated with the speed and nature of structural change
(McMillan and Rodrik, 2011; Ocampo and Vos, 2008; Taylor and Codrina, 2006)– Economic growth is associated with the size and growth of manufacturing industry
(Prebisch, 1948; Kaldor, 1967; Rodrik, 2006)– Modern economic growth is a process of continuous technological innovation, industrial
upgrading and technological diversification (Lin, 2012)– As countries get richer they diversify and produce a wider range of goods. Only at high
level of incomes countries specialise (Imbs and Wacziarg, 2003) – Economic growth and industrial structural change are positively associated (UNDESA,
2006).
• How does structural change impact the rate of growth?– Reallocation effects – Shifts in resource endowments– Technological change and technological capabilities– Learning by doing– Intra-national trade
4
Structural change and economic growth
5
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 500 $US
Structural change and economic growth
6
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 1,000 $US
Structural change and economic growth
7
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 4,000 $US
Structural change and economic growth
8
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 7,000 $US
Structural change and economic growth
9
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
strie
s
Real GDP per capita (PPP adjusted): 10,000 $US
Structural change and economic growth
10
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 13,000 $US
Structural change and economic growth
11
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 16,000 $US
Structural change and economic growth
12
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 19,000 $US
Structural change and economic growth
13
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 22,000 $US
Structural change and economic growth
14
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 25,000 $US
Structural change and economic growth
15
0 5 10 15 20 25
Food and beveragesTobacco
TextilesWearing apparel
Wood productsPaper
Printing and publishingCoke and refined petroleum
ChemicalsRubber and plastic
Non-metallic mineralsBasic metals
Fabricated metalsMachinery and equipment
Electrical machinery and apparatusPrecision instruments
Motor vehicles
Large countries: VA share in MVA
Indu
stri
es
Real GDP per capita (PPP adjusted): 40,000 $US
Industrial Structural Change Research at UNIDO• Starting point
– Chenery’s work (Chenery and Watanabe 1958; Chenery 1960; Chenery and Taylor 1968, etc.)
– UNIDO statistics• Departures
– Data: • Value added in nominal and real terms • 18 manufacturing industries • Stretching into 120 countries• Covers 45 years, 1963-2008
– Selection of appropriate estimation methodology:• Cubic form
• Fixed effects estimation procedure to control for unobserved country conditions
• Variables expressed in logarithmic terms to measure elasticity in each variable
16
Where X stands for dependent variables – value added share, value added per capita output, value added per worker (labor productivity) and employment share.
Results and findings 1. Country-size matters
2. Most manufacturing sectors in large countries peak in terms of value added share in total MVA – there is an inverted U-pattern.
3. Manufacturing sectors in large countries peak in stages at different income levels 4. In sectors that peak early valued added, employment and labour productivity growth slow down as income expand5. In middle-peaking sectors value added and employment growth slows down but labour productivity growth holds steady as income expand 6. In late industries value added and productivity grow faster compensating for the slow down in employment
17
Results and Findings
18
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
1000
4000
7000
1000
0
1300
0
1600
0
1900
0
2200
0
2500
0
2800
0
3100
0
3400
0
3700
0
4000
0Gro
wth
ela
stici
ty
GDP per capita in $US (PPP adjusted)
Large countries
Value added per capita
Labor productivity
Employment-population ratio
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
1000
4000
7000
1000
0
1300
0
1600
0
1900
0
2200
0
2500
0
2800
0
3100
0
3400
0
3700
0
4000
0Gro
wth
ela
stici
ty
GDP per capita in $US (PPP adjusted)
Medium countries
Value added per capita
Labor productivity
Employment-population ratio
1. Country-size matters : e.g. food and beverages
-1
-0.5
0
0.5
1
1.5
2
2.5
10
00
40
00
70
00
10
00
0
13
00
0
16
00
0
19
00
0
22
00
0
25
00
0
28
00
0
31
00
0
34
00
0
37
00
0
40
00
0
Gro
wth
ela
stici
ty
GDP per capita in $US (PPP adjusted)
Small countries
Value added per capita
Labor productivity
Employment-population ratio
Results and Findings
19
2. Most manufacturing sectors in large countries peak in terms of value added share in total MVA – there is an inverted U-pattern.
Results and Findings
20
3. Manufacturing sectors in large countries peak at different income stages - early-peaking, middle-peaking and late-peaking sectors.
Results and Findings
21
4. Early Industries: Slow down of value added, employment and productivity as incomes grow but……
-2
-1
0
1
2
1,0
00
3,0
00
5,0
00
7,0
00
9,0
00
11
,00
0
13
,00
0
15
,00
0
17
,00
0
19
,00
0
21
,00
0
23
,00
0
25
,00
0
27
,00
0
29
,00
0
31
,00
0
33
,00
0
35
,00
0
37
,00
0
39
,00
0
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Non-metallic mineral
Value added per capita Employment-population ratio Labor productivity
-2
-1
0
1
2
3
1,0
00
3,0
00
5,0
00
7,0
00
9,0
00
11
,00
0
13
,00
0
15
,00
0
17
,00
0
19
,00
0
21
,00
0
23
,00
0
25
,00
0
27
,00
0
29
,00
0
31
,00
0
33
,00
0
35
,00
0
37
,00
0
39
,00
0
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Wood products
Value added per capita Employment-population ratio Labor productivity
-2
-1
0
1
2
3
1,0
00
3,0
00
5,0
00
7,0
00
9,0
00
11
,00
0
13
,00
0
15
,00
0
17
,00
0
19
,00
0
21
,00
0
23
,00
0
25
,00
0
27
,00
0
29
,00
0
31
,00
0
33
,00
0
35
,00
0
37
,00
0
39
,00
0
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Wearing apparel
Value added per capita Employment-population ratio Labor productivity
Results and Findings
22
5. Middle Industries: Slow down of value added and employment is kept in check by productivity growth except for…
-2
-1
0
1
2
3
1,000
3,000
5,000
7,000
9,000
11,00
013
,000
15,00
017
,000
19,00
021
,000
23,00
025
,000
27,00
029
,000
31,00
033
,000
35,00
037
,000
39,00
0Grow
th ela
sticit
y
Real GDP per capita ($US)
Basic metals
Value added per capita Employment-population ratio Labor productivity
-2
-1
0
1
2
3
1,000
3,000
5,000
7,000
9,000
11,00
013
,000
15,00
017
,000
19,00
021
,000
23,00
025
,000
27,00
029
,000
31,00
033
,000
35,00
037
,000
39,00
0Growt
h elas
ticity
Real GDP per capita ($US)
Fabricated metals
Value added per capita Employment-population ratio Labor productivity
Results and Findings
23
6. Late industries: Value added and labor productivity grow much faster than GDP growth arresting the slow down in employment growth
-2
-1
0
1
2
3
1,0
00
3,0
00
5,0
00
7,0
00
9,0
00
11
,00
0
13
,00
0
15
,00
0
17
,00
0
19
,00
0
21
,00
0
23
,00
0
25
,00
0
27
,00
0
29
,00
0
31
,00
0
33
,00
0
35
,00
0
37
,00
0
39
,00
0
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Chemical products
Value added per capita Employment-population ratio Labor productivity
-2
-1
0
1
2
3
1,0
00
3,0
00
5,0
00
7,0
00
9,0
00
11
,00
0
13
,00
0
15
,00
0
17
,00
0
19
,00
0
21
,00
0
23
,00
0
25
,00
0
27
,00
0
29
,00
0
31
,00
0
33
,00
0
35
,00
0
37
,00
0
39
,00
0
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Machinery and equipment
Value added per capita Employment-population ratio Labor productivity
-2
-1
0
1
2
1,00
0
3,00
0
5,00
0
7,00
0
9,00
0
11,0
00
13,0
00
15,0
00
17,0
00
19,0
00
21,0
00
23,0
00
25,0
00
27,0
00
29,0
00
31,0
00
33,0
00
35,0
00
37,0
00
39,0
00
Gro
wth
ela
stici
ty
Real GDP per capita ($US)
Electrical machinery and apparatus
Value added per capita Employment-population ratio Labor productivity
Applications to Industrial Policy
• Benchmarking– Any country at any level of income– Grouping of countries
• Entry and exit points– At which level of income an industry becomes
attractive according to its value added growth, labour productivity and employment potential
– At which level of income the value added growth, labour productivity and employment potential may no longer be attractive
24
Application: Comparison Egypt, South Korea and Large Countries
25
0
5
10
15
20
25Food and beverages
Tobacco
Textiles
Wearing apparel
Wood products
Paper
Printing and publishing
Coke and refined …
ChemicalsRubber and plastic
Non-metallic minerals
Basic metals
Fabricated metals
Machinery and …
Electrical machinery …
Precision instruments
Motor vehicles
Furniture, n.e.c.
Egypt in 2007: real GDP per capita (PPP adjusted) 5,700 US$
26
0
5
10
15
20
25Food and beverages
Tobacco
Textiles
Wearing apparel
Wood products
Paper
Printing and publishing
Coke and refined …
ChemicalsRubber and plastic
Non-metallic minerals
Basic metals
Fabricated metals
Machinery and …
Electrical machinery …
Precision instruments
Motor vehicles
Furniture, n.e.c.
Egypt in 2007: real GDP per capita (PPP adjusted) 5,700 US$
Korea in 1989: real GDP per capita (PPP adjusted) 10,700 US$
Application: Comparison Egypt, South Korea and Large Countries
27
0
5
10
15
20
25Food and beverages
Tobacco
Textiles
Wearing apparel
Wood products
Paper
Printing and publishing
Coke and refined …
ChemicalsRubber and plastic
Non-metallic minerals
Basic metals
Fabricated metals
Machinery and …
Electrical machinery …
Precision instruments
Motor vehicles
Furniture, n.e.c.
Egypt in 2007: real GDP per capita (PPP adjusted) 5,700 US$
Korea in 1981: real GDP per capita (PPP adjusted) 5,700 US$
Application: Comparison Egypt, South Korea and Large Countries
28
Application: Comparison Egypt, South Korea and Large Countries
29
0
5
10
15
20
25Food and beverages
Tobacco
Textiles
Wearing apparel
Wood products
Paper
Printing and publishing
Coke and refined …
ChemicalsRubber and plastic
Non-metallic minerals
Basic metals
Fabricated metals
Machinery and …
Electrical machinery …
Precision instruments
Motor vehicles
Furniture, n.e.c.
Egypt in 2007: real GDP per capita (PPP adjusted) 5,700 US$
Large countries: real GDP per capita (PPP adjusted) around 5,700 US$
Application: Comparison Egypt, South Korea and Large Countries
30
Application: Comparison South Africa, South Korea and Large Countries
31
Application: Comparison South Africa, South Korea and Large Countries
32
Application: Comparison South Africa, South Korea and Large Countries
33
Application: Comparison South Africa, South Korea and Large Countries
34
Application: Comparison South Africa, South Korea and Large Countries
Application: entry and exit points
35
Growth charts: fastest and slowest growing – early, middle and late sectors
-4
-2
0
2
4
10
00
20
00
30
00
40
00
50
00
60
00
70
00
80
00
90
00
10
00
0
11
00
0
12
00
0
13
00
0
14
00
0
15
00
0
16
00
0
17
00
0
18
00
0
19
00
0
20
00
0
21
00
0
22
00
0
23
00
0
24
00
0
25
00
0
26
00
0
27
00
0
28
00
0
29
00
0
30
00
0
31
00
0
32
00
0
33
00
0
34
00
0
35
00
0
36
00
0
37
00
0
38
00
0
39
00
0
40
00
0
Gro
wth
ela
stici
ty
Real GDP per capita (PPP adjusted) in US$
Real value added per capita in US$
Food and beverages: fastest growing early sector
Tobacco: slowest growing early sector
Paper: fastest growing middle sector
Fabricated metals: slowest growing middle sector
Electrical machinery and apparatus: fastest growing late sector
Motor vehicles: slowest growing late sector
Real GDP per capita (PPP adjusted) in Korea in 2007: 23,900 US$
Real GDP per capita (PPP adjusted) in South Africa in 2007: 10,400 US$
Real GDP per capita (PPP adjusted) in Egypt in 2007: 5,700 US$
Application: entry and exit points
36
Growth charts: fastest and slowest growing – early, middle and late sectors
-4
-2
0
2
4
10
00
20
00
30
00
40
00
50
00
60
00
70
00
80
00
90
00
10
00
0
11
00
0
12
00
0
13
00
0
14
00
0
15
00
0
16
00
0
17
00
0
18
00
0
19
00
0
20
00
0
21
00
0
22
00
0
23
00
0
24
00
0
25
00
0
26
00
0
27
00
0
28
00
0
29
00
0
30
00
0
31
00
0
32
00
0
33
00
0
34
00
0
35
00
0
36
00
0
37
00
0
38
00
0
39
00
0
40
00
0
Gro
wth
ela
stici
ty
Real GDP per capita (PPP adjusted) in US$
Labor productivity
Non-metallic minerals: fastest growing early sector
Furniture, n.e.c.: slowest growing early sector
Basic metals: fastest growing middle sector
Fabricated metals: slowest growing middle sector
Electrical machinery and apparatus: fastest growing late sector
Rubber and plastic: slowest growing late sector
Real GDP per capita (PPP adjusted) in Egypt in 2007: 5,700 US$
Real GDP per capita (PPP adjusted) in South Africa in 2007: 10,400 US$
Real GDP per capita (PPP adjusted) in Korea in 2007: 23,900 US$
Application: entry and exit points
37
Growth charts: fastest and slowest growing – early, middle and late sectors
-4
-2
0
2
4
10
00
20
00
30
00
40
00
50
00
60
00
70
00
80
00
90
00
10
00
0
11
00
0
12
00
0
13
00
0
14
00
0
15
00
0
16
00
0
17
00
0
18
00
0
19
00
0
20
00
0
21
00
0
22
00
0
23
00
0
24
00
0
25
00
0
26
00
0
27
00
0
28
00
0
29
00
0
30
00
0
31
00
0
32
00
0
33
00
0
34
00
0
35
00
0
36
00
0
37
00
0
38
00
0
39
00
0
40
00
0
Gro
wth
ela
stici
ty
Real GDP per capita (PPP adjusted) in US$
Employment-population ratio
Wearing apparel: fastest growing early sector Tobacco: slowest growing early sector
Precision instruments: fastest growing middle sector Basic metals: slowest growing middle sector
Machinery and equipment: fastest growing late sector Chemicals: slowest growing late sector
Real GDP per capita (PPP adjusted) in Egypt in 2007: 5,700 US$
Real GDP per capita (PPP adjusted) in South Africa in 2007: 10,400 US$
Real GDP per capita (PPP adjusted) in Korea in 2007: 23,900 US$
Extensions• New variables: capital-labor ratio, wages,
firm size, total factor productivity, resource intensity (energy, water)
• Extension of the country classification: population density, natural resource endowments, landlocked
• More detailed manufacturing classification – 4 digit ISIC
• Expansion to international trade data• Exploration of linkages through input-output
relations 38
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