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This paper presents a shift-share decomposition of the role of structural change in driving labour productivity in sub-Saharan Africa (SSA). The paper further examines the effect that the observed structural change has had upon the dynamics of labour markets in SSA. The analysis is based on a newly constructed dataset, the Extended Africa Sector Database. This database updates and extends the Africa Sector Database of the Groningen Growth and Development Centre. It includes eighteen countries covering the period 1960–2015. Overall, the database shows that productivity growth has been slow, with large and persistent sectoral productivity gaps present. The extent of structural change has been higher than that observed in previous studies, however. But while the share of employment and value added in agriculture has declined, resources have been pulled into certain service sectors that have relatively low productivity, thus limiting aggregate productivity improvements. The general direction of structural change has not been towards the most productive sectors. Results of the labour market analysis complement this analysis, providing suggestive evidence of a role for labour market institutional arrangements in many SSA countries in affecting these outcomes.

In this paper we analyse economic development through the lenses of a newly developed index: the structural modernization index. This index combines two dimensions that have been widely invoked as prime drivers of economic development namely, structural change and technological catch up. For each country, the index calculates the productivity gap with respect to the world frontier in activities that typically represent the modern part of the economy, and weighs this relative productivity by the employment share of those activities in the total labour force. In doing so, it combines a technological dimension (relative productivity) and a structural dimension (the size of the modern sector) thus providing a concise measure of the degree of modernity of an economy. The index is calculated for a large sample of countries over a long time span. Significant efforts have been made to put together a dataset with international comparable data on value added and employment disaggregated by sectors for 100 countries covering the period 1950-2009. The estimates are used to explore the relationship between structural modernization and the so-called poverty and middle-income traps. In analysing this relationship, the interactive nature of structural change and technological catch up is stressed. Important insights are obtained regarding the nature of low and middle-income development traps. Finally, the usefulness of this new index is illustrated when studying the diverse structural trajectories of a set of countries that can be taken as examples of success and failure in the process of economic development.

Structural change is an important dimension of socio-economic development, closely connected with economic growth, as well as with innovation and technological change, international trade, political economy, employment dynamics and labour demand, inequality and poverty, and climate change, among many others. The current volume discusses the relationships between these and other factors and structural change, with this introductory chapter providing an analytic overview of the major themes discussed in the volume. The chapter seeks to discuss these issues in broad terms, highlighting the complex interactions between structural change and these different factors, thereby emphasizing the myriad ways through which structural change can impact upon—and be affected by—socio-economic outcomes.

This paper studies periods of prolonged contractions in output per capita in a sample of 145 countries from 1950 to 2014. Economic slumps are defined as abrupt interruptions of a period of growth by several regime switches. Slumps start with a sharp contraction along with a trend break, which is followed by another switch when growth stabilizes again. The paper then analyzes the correlates of these slumps, focusing on the length and depth of the contraction, from the beginning of the slump to its trough. The results establish three new stylized facts: (i) weak political institutions predate crises whereas political reforms tend to follow them, (ii) the length and depth of economic declines are robustly correlated with executive constraints and ethnic heterogeneity, and (iii) there is a robust interaction between these two variables, suggesting that institutions constraining leaders are important for stabilizing growth. This is particularly relevant for Sub-Saharan Africa, where politics are often ethnic and decision makers are comparatively unconstrained.

This paper proposes a new framework for poverty accounting, that is, the decomposition of poverty into its proximate components. Using aggregated household surveys from 124 countries, we estimate the potential impacts of income growth and redistribution on poverty rates, as well as their actual contributions to poverty reduction over the period from 1981 to 2010. Our fractional response approach shows that the potential impacts are highly non-linear and differ across regions and time. This non-linearity and variation need to be taken into account if empirical estimates are to inform development policy. Although historically growth has played the main role in poverty reduction, we find that initial inequality is a strong moderator of the impact of growth. In fact, there has been a shift towards pro-poor growth around the turn of the millennium, both at the $2 and at the $1.25 a day poverty line. Nevertheless, our projections of poverty rates until 2030 show that the end of extreme poverty within a generation, as put forth in the Sustainable Development Goals, is unlikely to materialize. (C) 2018 Elsevier B.V. All rights reserved.

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.

This paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and nonlinear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from their effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness is there robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.

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.

This paper examines the emergence of manufacturing in developing countries in the period 1950–2005. It presents new data on structural change in a sample of 67 developing countries and 21 advanced economies. The paper examines the theoretical and empirical evidence for the proposition that industrialisation acts as an engine of growth in developing countries and attempts to quantify different aspects of this debate. The statistical evidence is not completely straightforward. Manufacturing has been important for growth in developing countries, but not all expectations of the ‘engine of growth hypothesis’ are borne out by the data. The more general historical evidence provides more support for the industrialisation thesis.

Over the last half-century, per capita income in Latin America has stagnated relative to the United States and other benchmarking countries. Growth accounting techniques reveal that slow productivity growth is at the root of this weak performance, calling for detailed analyses and appropriate and timely policy responses. In addition to macroeconomic and regulatory factors, productivity depends crucially on microeconomic aspects and on the specific strategies and decisions of individual firms, though such microeconomic decisions have been seldom studied in a quantitative and comparative manner. This chapter focuses on this issue, highlighting the presence of heterogeneity across firms in the region and introducing the specific analysis of the drivers of this heterogeneity which is contained in the following chapters.

This paper presents new estimates of capital inputs in the Chinese economy. Estimates are made for the total economy (1953-2007), for the industrial sector (1953-2007) and for manufacturing (1985-2007). The capital input estimates for industry and manufacturing are also broken down by thirty regions. The paper makes a systematic attempt to apply SNA (System of National Accounts) concepts to the estimation of capital inputs, according to the Perpetual Inventory Method. It makes a clear distinction between capital services from a productivity perspective and wealth capital stocks. The paper provides a detailed analysis of the relevant Chinese statistical concepts and data. It provides an explanation of the procedures followed in constructing the new national and regional capital input series. (C) 2011 Elsevier Inc. All rights reserved.

In this study, we examine the impact of social capital on entrepreneurial innovativeness in an African context. Social capital refers to resources that are embedded in a durable network of relationships. This article focuses specifically on the structure of networks. There are two main views on the relation between network structure and entrepreneurial performance. One view argues that closed networks are beneficial for cooperation and resource sharing, which is needed to implement an innovation, while another view argues that closed networks constrain entrepreneurs, since it is open networks that provide entrepreneurs with fresh information and ideas. Based on these arguments, we hypothesise that the relationship between the degree of constraint of a network and innovative performance has an inverted U-shape. We also examine the hypothesis that overlap between personal and business networks will hamper innovative performance of entrepreneurs because information will be less diverse and heterogeneous, and because re-distributive kinship obligations may act as a drain on entrepreneurial resources. We test our hypotheses using a recent survey of about 700 Ugandan rural and urban entrepreneurs. Our hypotheses are supported in the urban sample, but not in the rural sample. Copyright 2012 , Oxford University Press.

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.

This paper examines the importance of local knowledge spillovers for the innovative and export performance of firms in a developing country context. Theoretical and empirical studies in advanced economies underline the significance of local knowledge spillovers for innovation. However, not much is known about whether local knowledge spillovers work similarly in developing countries. This analysis is based on an original innovation survey in the software industry in Uruguay. The survey focuses on the direct identification and measurement of local knowledge spillovers; pure knowledge spillovers are distinguished from commercial knowledge transactions. Both knowledge spillovers and knowledge transactions are measured at the local and at the international level. The study concludes that local knowledge spillovers play a crucial role in enhancing the innovative performance of software firms in Uruguay. However, for the export performance of the firms, international knowledge transactions turn out to be more im...

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.

In this paper, we analyse the diffusion and adoption of paper making machinery in the Indonesian pulp and paper industry, from 1923 till 2000. The two main questions in this paper are: (1) What patterns of technology diffusion can be discerned in the Indonesian paper manufacturing sector? (2) What role have industrial policies played in the diffusion of technology and the expansion of the paper industry? To address these questions, we develop a machine index (mach), which measures the technological distance of each paper machine to the world technological frontier through time. The documented trends in an aggregate version of the technology index reveal a pattern of rapid catch up. The paper argues that industrial policy has played an important role in the speed and nature of diffusion of paper making machinery in Indonesia. A more disaggregated analysis indicates that conglomerate owned mills adopted advanced paper machines close to the technological frontier, while independent and publicly owned mills installed more outdated equipment. Embodied technological catch up in paper making has thus been a highly polarised phenomenon, limited to only a few firms, which had the financial resources and the capabilities to install large-scale modern machinery. Keywords Asia, Indonesia, Pulp and paper industry, Technology diffusion, Technology adoption, Industrial policy

Although there is a substantial body of literature on the importance of technological capabilities for economic development, the exact relationships between technological efforts, technological capabilities and economic performance at micro-level still remain unclear. How do technological efforts affect technological capabilities? To what extent and how do improvements in technological capabilities result in better economic performance of firms? This paper aims to develop adequate quantitative measures of machine-level technological effort, technological capabilities and economic performance for the paper industry in West Java, Indonesia. It explores the empirical relationships between these micro-level variables, focusing both on the relationships between efforts and capabilities and between capabilities and economic performance, with a view to deepening our general understanding of the role of capabilities in successful and less successful processes of industrialisation.

By means of a ‘Cycle of Matter’ model a comprehensive scrap cycle can be estimated for a region, country or continent. The model covers scrap flows between the three main actors defining the cycle, i.e. scrap users, scrap generators and scrap dealers. The ‘Cycle of Matter’ incorporates the generation and use of three types of scrap, i.e. home scrap, prompt scrap and obsolete scrap. It allows for a better assessment of the impact of government policies regarding scrap recycling in various parts of the scrap cycle. This paper presents the main results of a detailed study of the national scrap recycling industry of a developing country, Tanzania. The scrap flows in the ‘Cycle of Matter’ model were estimated on the basis of specially tailored surveys amongst scrap users, producers and traders, and on the basis of secondary data and coefficients derived from the literature. The paper demonstrates that the model is a powerful tool for the analysis of the scrap cycle. The study reveals that Tanzania possesses large surpluses of scrap. These surpluses are increasing over time. The scrap users — foundries and steel mills — are not capable of utilising all available scrap. Large quantities of scrap are thus either dumped in the environment or transferred abroad. Foundries and steel mills will only be able to make better use of existing scrap surpluses if they succeed in upgrading their quality of their production processes.

This paper investigates the effects of connectivity charges (communication costs) on bilateral exports in Sub Saharan Africa (SSA). Data from 19 exporter countries was used together with communication costs data in a gravity model of trade setup. The export data derive from the IMF Direction of Trade and the COMTRADE databases, while the communication cost data was collated from a variety of sources including direct contact with service providers. We find that communication cost is an important factor in bilateral trade in the region. Communications have a significant negative effect on export intensity. The study also reveals that countries with high communication costs generally have lower export intensity than countries with low communication costs. The results suggest that investment in ICT infrastructure that brings down international communication costs will have a positive effect on regional trade in the long run.

This paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks, and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and non-linear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from the effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness there is robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.

This paper examines the role of structural change in explaining aggregate productivity growth in the manufacturing sector of four Asian countries over the period 1963–1993. The conventional shift-share analysis is used to measure the impact of shifts in both labour and capital inputs. The results do not support the structural-bonus hypothesis, which states that during industrial development, factor inputs shift to more productive branches. This finding is robust, even when the conventional shift-share analysis is modified to take into account increasing returns to scale as described in Verdoorn's law. It is argued that improvements in productivity levels were widespread and depended negatively on the distance from the global technology frontier, confirming the Gerschenkronian notion of catch-up.

Using an industry of origin methodology, USA–China average unit value ratios (UVR) for 1985 are derived from the Chinese and US censuses of production. Applying these UVRs to convert Chinese manufacturing GDP into US dollars results in a comparative labour productivity of 6.2 percent of the US level in 1985. This is twice as high as the figure found using the 1985 exchange rate as a conversion factor. In order to extrapolate the 1985 benchmark comparison, time series are constructed for 15 branches of manufacturing. Between 1980 to 1992 GDP was growing at 7.6% per year, labour productivity at 3.4% per year. The process of rapid growth of manufacturing output and labour productivity was not accompanied by catch-up compared to the USA.

This paper focuses on comparative productivity performance in manufacturing in five major Asian economies: China, India, Indonesia, Korea and Taiwan. Using conversion factors derived according to an industry of origin approach, comparisons of real labour productivity are made, with the world productivity leader, the USA, as reference country in a star comparison. Benchmark level comparisons are extrapolated with time series. A distinction is made between Korea and Taiwan, which have experienced rapid productivity catch-up, and China, India and Indonesia, where relative productivity showed little change throughout the 1980s. Besides aggregate comparisons, the paper provides sectoral breakdown for 13 branches of manufacturing. The analysis at branch level reveals similar patterns and trends to those at the aggregate level. Catch-up accounting shows that changes in the structure of employment within manufacturing contributed little to aggregate catch-up. Labour productivity catch-up in Korea and Taiwan is primarily due to catch-up in capital intensity, but this process is still far from complete.

This paper provides industry-of-origin comparative estimates of real output and labour productivity in the Indonesian and Australian manufacturing sectors. It makes binary comparisons for the benchmark year 1987, and extrapolates the 1987 benchmark backward and forward using national time series, to derive comparisons for the years 1975–90. Expressed in ‘purchasing power parities’ (PPPs), the gross value of output and value added in Indonesian manufacturing in 1987 was 40% and 34% of the respective Australian levels. In 1987 the Indonesian manufacturing price level was 74% of the Australian level, and Indonesian manufacturing labour productivity was 16% of that in Australia. 1975 to 1990 was a period of catch-up. The Indonesian manufacturing price level declined from 105% to 60% of the Australian level, while labour productivity increased from 12% to 17% of the Australian level. The catch-up was greater from the early 1980s onwards.

To date there has been few systematic and comparative empirical analyses of the nature of economic development in Brazil, Russia, India, China and South Africa (BRICS). We contribute to addressing this gap by exploring the patterns of structural change between 1980 and 2010, focusing on the manufacturing sector. We show that three of the BRICS are experiencing de-industrialization (Brazil, Russia and South Africa). China is the only country where an expanding manufacturing sector accounts for a significant part of aggregate growth. We explore the differences in patterns and causes of manufacturing between China and the other BRICS. These differences are down to differences in industrial policy: in China industrial policy supported both foreign and domestic investment for technological catch-up. It is the only country where FDI favoured the manufacturing sector and manufactured exports, and where domestic investment started becoming increasingly important compared to FDI from 1995 onward.

What is the relationship between technological innovation, entrepreneurship and development? Is it better for developing countries to coping and adapt existing technologies from richer countries rather than undertake or promote intensive research and development (R&D) of their own? We tackle these perennial issues afresh by considering the relationship between knowledge, innovation and growth in the past and by identifying whether and how the scope for catch-up growth exists. We focus on the interesting case of technological innovation in the comparative economic performance of China; we draw some lessons for development elsewhere.

The pace of poverty reduction through growth vs. redistribution is at the heart of current debates on equitable development. In this paper, we argue that empirical poverty decompositions should build in the inherent boundedness of the poverty headcount ratio directly. As a solution, we propose a fractional response approach to estimating poverty decompositions, and present extensions dealing with unobserved heterogeneity, measurement error and unbalancedness. Using a large new data set, we estimate income and inequality (semi-)elasticities of poverty for the 2$ a day and 1.25$ a day poverty lines. The models fit the data remarkably well over the entire data range. We highlight the relevance of focusing on semi-elasticities for policy purposes and, building on the improved accuracy of the fractional response results, we present poverty projections from 2010 through 2030. Finally, we discuss some implications of these results for the post-2015 development agenda.