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This chapter discusses the entry of China into the game of foreign finance in Africa in an international comparative perspective. We present an analysis of long-run changes in the allocation of Western aid both globally and in Africa, along with estimates of the global sectoral allocation of Chinese aid. A similar analysis is also applied to China’s foreign direct investment and international trade. While previous literature has predominantly attributed China’s economic embrace of Africa to domestic factors, we argue that the sectoral distribution of Beijing’s foreign aid—and partly foreign direct investment—is also affected by changes in the patterns of Western aid and investment flowing to the African continent. We provide quantitative evidence for long-run trends, switches and breaks in Western development assistance. China’s foreign aid typically flows into Africa’s physical infrastructure and productive sectors of agriculture and manufacturing, filling the vacuum which emerged when Western financial flows shifted to other activities, most notably capacity building and good governance reforms. While the increasing trade relationships between China and Africa are often described as South–South trade, the pattern highly resembles the typical North–South trade patterns. Overall, this chapter shows that financial resources from both the traditional Western donors and emerging donors from the Global South such as China can help African recipient countries to achieve the Sustainable Development Goals. China’s development assistance in Africa may serve as a complement to the kinds of foreign aid provided by the traditional donor countries.

This chapter summarizes the main results of the book, presenting new evidence on the factors preventing faster productivity growth in Latin America and the Caribbean. Innovation significantly influences the productivity of firms, although to different degrees depending on their characteristics. The evidence confirms that the impact of innovation on productivity depends also on additional complementary assets, such as access and use of ICT and on-the-job training. These conclusions also hold true for the Caribbean economies, traditionally understudied. Additional factors that can influence productivity have also been detected, such as the age of firms, their access to credit and finance, and their participation in international markets and global value chains. On the basis of this evidence, we suggest that achieving efficiency improvements within firms requires detailed microeconomic policies that directly address these factors.

It is widely believed that the acceleration of growth since reforms began in 1978 has increased regional disparities in China. This paper examines whether this is the case for GDP per capita, labour productivity and technical efficiency in industry in 30 regions from 1978 to 2005. The unexpected conclusion is that over the whole period, there has been convergence rather than divergence: more backward regions have caught up with leading regions. The process of regional convergence was especially strong from 1978 to 1990. In the 1990s, there was divergence, but convergence resumed after 2000, leaving regional inequalities in 2005 much smaller than in 1978. Possible theoretical and policy explanations for the observed pattern are considered.

In this study we analyze the micro-dynamics of catch-up in Indonesian paper manufacturing, using a two-country plant-level dataset for the period 1975–97. We apply data envelopment analysis (DEA) to measure to what extent Indonesian paper mills are catching up with Finnish mills in terms of technical efficiency. Three questions are addressed: What is the distribution of Indonesian plant technical efficiency vis-à-vis the technological frontier? What is the role of entry, exit, and survival in Indonesia for catch-up in the paper industry as a whole? In what ways do catching-up plants in Indonesia differ from non-catching-up plants? We find that on average the Indonesian paper industry moved closer to the technological frontier during the 1990s. However, catch-up has been a highly localized process in which only a few large establishments have achieved near best-practice performance, while most other plants have stayed behind.

This article focuses on the contribution of structural change to aggregate manufacturing and industrial productivity in China. Using shift-share techniques, this article examines three types of structural change: changes in the sectoral structure of production, changes in the ownership structure, and changes in the regional structure of production. Overall productivity growth was slow in the 1980s, but accelerated dramatically from 1990 onwards. In 1980s, we found evidence of a structural change bonus, with sectoral shifts contributing 24% to overall productivity growth. However, when productivity growth accelerated in the 1990s, the contribution of the shift effect dropped to a mere 3.3%. In contrast to sectoral changes, changes in the ownership structure in the early 1980s contributed negatively to overall productivity growth. The contributions of ownership change turned positive after 1985, reaching 23% of productivity growth in the period 1992–1997. Shifts in ownership explain a substantial part of productivity growth during the productivity boom. Like shifts in ownership, regional shifts initially contributed negatively to productivity growth till 1992, and positively thereafter. However, the general contribution of regional shifts is lower than the contributions of sectoral and ownership shifts. Contrary to initial expectations, the regional analysis of productivity trends does not indicate regional divergence. Copyright 2008 , Oxford University Press.

1: Wim Naude, Adam Szirmai and Nobuya Haraguchi: Introduction and Overview PART I: COMPARATIVE ANALYSES 2: Nobuya Haraguchi and Gorazd Rezonja: Structural Change in the BRICS' Manufacturing Industries 3: Gjalt de Vries, Abdul Erumban, Marcel Timmer, Ilya Voskoboynikov, and Harry X. Wu: Deconstructing the BRICs: Structural Transformation and Aggregate Productivity Growth PART II: COUNTRY EXPERIENCES 4: Justin Jifu Lin and Miaojie Yu: Industrial Upgrading and Poverty Reduction in China 5: Ximing Yue: Structural Change, Employment, and Poverty Alleviation in China 6: Boris Kuznetsov, Andrei Yakovlev, and Vladimir Gimpelson: The Manufacturing Sector in Economic Development, Employment, and Incomes: The Case of Russia 7: Renato Perim Colistete and Dante Mendes Aldrighi: Industrial Growth and Structural Change: Brazil in a Long-Run Perspective 8: Aradhna Aggarwal Delhi and Nagesh Kumar: Structural Change, Industrialisation and Poverty Reduction: The Case of India 9: David Ellis Kaplan: The Structure and Performance of Manufacturing in South Africa PART III: THEMATIC PERSPECTIVES 10: Fred Nixson: The Dynamics of Global Value Chain Development: A BRICS Perspective 11: Ruth Rama: Foreign Multinational Enterprises in the Food and Beverages Industries of BRICS 12: Wim Naude, Adam Szirmai and Alejandro Lavopa: Industrialisation and Technological Change in the BRICS: The Role of Foreign and Domestic Investment 13: Yanyun Zhao and Siming Liu: Investment, Technological Change and Industrial Development: The Case of China 14: John Weiss: Internal and External Demand and Manufacturing Development in BRICS 15: Michiko Iizuka, Isabel Maria Bodas Freitas, and Eva Dantas: The Diffusion of Renewable Energy Technologies in BRICS 16: Michele Di Maio: Industrial policy in the BRICS: Similarities, Differences and Future Challenges PART IV: CONCLUSION 17: Wim Naude, Adam Szirmai, and Nobuya Haraguchi: Conclusion

Since the middle of the eighteenth century, manufacturing has functioned as the main engine of economic growth and development. However, in recent research, questions have been raised concerning the continued importance of the manufacturing sector for economic development. This paper reexamines the role of manufacturing as a driver of growth in developing countries in the period 1950-2005. The paper makes use of a newly constructed panel dataset of annual value added shares (in current prices) for manufacturing, industry, agriculture and services for the period 1950-2005. Regression analysis is used to analyse the relationships between sectoral shares and per capita GDP growth for different time periods and different groups of countries. For the total sample, we find a moderate positive impact of manufacturing on growth in line with the engine of growth hypothesis. Splitting our sample into three subperiods, we only find a direct effect of manufacturing on growth for the middle period 1970-1990. We also find interesting interaction effects of manufacturing with education and income gaps. In a comparison of the subperiods, it seems that since 1990, manufacturing is becoming a more difficult route to growth than before.

This paper focuses on the role of interregional technology spillovers in the process of industrial growth in Chinese regions in the period 1990-2005. Inflows of FDI increased rapidly from 1990 till 1998, slowing down thereafter. Domestic R&D investment accelerated after 1998. Regional industrial growth benefits from both interregional R&D spillovers and after 1998 from international FDI spillovers. However, in contrast to R&D spillovers, FDI spillovers contribute conditionally, mainly in areas where local R&D stocks are high enough. Interestingly, indirect interregional FDI spillover effects are negative. Foreign investment in one region attracts resources from regions with less FDI, thus having a negative influence on growth of industrial output in neighbouring regions.

The successful industrialization and catch up of countries in the East Asian region gave rise to an important debate concerning the role played by technological learning and knowledge creation. This paper seeks to examine this issue for Indonesia, a second-tier newly industrializing country. It focuses on the relative importance of learning from imported inputs vis-a-vis other factors influencing productivity in manufacturing. The concept of learning is operationalized drawing on the literature on technology spillovers on the one hand, and the literature on catch up à la Abramovitz, on the other. Our results indicate that knowledge spillovers have become significant contributors to labor productivity growth after the liberalization of the Indonesian economy.

As long as people work with their bare hands, their daily production will remain low. This sets a limit to the attainable level of economic welfare in a traditional agriculture-based economy. Higher standards of living can only be realised if production per worker increases. One of the principal ways to raise labour productivity is by providing workers with tools, implements and machines – in other words through capital accumulation. Capital accumulation is intimately associated with the emergence of an industrial sector. Therefore, economic development is linked to structural change and industrialisation. This chapter focuses on structural change and the relationships between agriculture and industry in the course of economic development. It provides a setting for the discussion of industrialisation in Chapter 9 and agricultural development in Chapter 10. The point of departure is the fact that in the process of economic development the share of the agricultural sector in production and employment declines and the share of the industrial sector increases. However, this does not mean that the agricultural sector should be neglected. This chapter argues for a positive view of the contributions of the agricultural sector to the wider process of development. The argument consists of two main elements. First, successful industrialisation processes are usually preceded by increases in agricultural productivity. Second, in later stages of development a stagnating agricultural sector can be an obstacle to further development of the entire economy. Therefore, a balanced approach to agriculture and industry is called for.

Like health, education is both an end and a means. It is one of the basic human rights and a developmental goal in its own right. But, education also contributes to the realisation of other important developmental goals (UNESCO, 2002). Functions and tasks generally ascribed to education include the following: Promotion of economic growth and development. Investment in the physical capital stock is not sufficient for economic development. Investment in ‘human capital’ is also required. Modernisation of attitudes and mentalities in society. Contributing to important developmental goals such as increased life expectancy, improved health and reduced fertility. Education of mothers, in particular, makes important contributions to better health of children and reductions in fertility. These are among the important non-economic benefits of education. These relationships have been discussed in the chapters on population and health (Chapters 5 and 6). Political socialisation, promotion of a sense of civic responsibility, contributing to national integration and national political consciousness in developing countries. Reducing social and gender inequality and increasing social mobility. Contributing to personal growth, development and emancipation. Immediately after World War II, expectations concerning the role of education in development were high. Expansion and improvement of education were generally considered as essential to development. Governments in developing countries were prepared to invest heavily in education. Families saw education as the main way to improve their children's chances in life.

In the context of late industrialisation the effective transfer and adaptation of technology is of great importance for economic development. International technology transfer is not a costless process, but requires considerable technological effort and investments in the development of technological capabilities.