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The Structure of Structural Change and Growth Erol Taymaz Yılmaz Kılıçaslan

The Structure of Structural Change and Growth Erol Taymaz Yılmaz Kılıçaslan Department of Economics Middle East Technical University Ankara 06531 Turkey IKD Seminar 26 April 2007. Outline. Questions Structure of production Structure of trade Structural convergence Conclusions.

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The Structure of Structural Change and Growth Erol Taymaz Yılmaz Kılıçaslan

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  1. The Structure of Structural Change and Growth Erol Taymaz Yılmaz Kılıçaslan Department of Economics Middle East Technical University Ankara 06531 Turkey IKD Seminar 26 April 2007

  2. Outline • Questions • Structure of production • Structure of trade • Structural convergence • Conclusions

  3. Questions • In so far as the industrialisation remains an engine of development, structural change and technological growth and modernization, growing manufactured exports are a sign that this engine is working (Lall, 2000: 338).

  4. Questions • Structure of industry, structural change and growth • Some industries are technologically more dynamic • Generate more innovations • Diffuse innovations throughout the economy • Some industries grow faster • Some industries are more productive

  5. Questions Structural change facilitates growth • More innovative/dynamic structure • Average productivity: If the share of more productive industries increases, the average productivity increases.

  6. Questions Convergence ? • Less-developed countries are expected to grow faster • by increasing capital intensity, and • by adopting (transferring) technologies generated by developed countries • What about the structure of the industry? Any convergence in structure?

  7. Questions • Is there any relationship between structure, structural change and growth? • What is the contribution of structural change to productivity growth?

  8. Data • UNIDO Industrial Statistics and Industrial Supply and Demand (Trade) Databases • 40+ countries • Production: 1965-1999 period, 3-digit industries • Trade: 1980-1999 period, 3-digit industries

  9. Structural change and productivity • Labor productivity at the manufacturing industry level

  10. Structural change and productivity • Within and between components of labor productivity growth

  11. Structural change and productivity Contribution of structural change in the period 1965-99 • High income countries: almost no effect • Low income countries: very small effect • Fast growing countries: not very high, but varies between countries: • Korea: almost no effect • Ireland: not negligible (27 % in 1965-79, 16 % in 1980-99) • Turkey: negative after 1980! Within-industry productivity growth dominates between-industry productivity growth

  12. Structure of production • 3-sector classification • High tech, medium tech, low tech (OECD) • Classification of countries • Low-income, mid-income, high-income (World Bank) • Growth performance (fast growing countries, Indonesia, Ireland, Korea, Malaysia, Malta, Philippines, Singapore and Turkey) • Average value added shares for 5-year periods • 1965-69, 1970-74, 1975-79, • 1980-84, 1985-89, 1990-94, 1995-99

  13. MT India Pakistan Zimbabwe Kenya Tanzania Ethiopia HT LT Ethiopia India Kenya Pakistan Tanzania Zimbabwe Structure of production

  14. Structure of production

  15. Structure of production

  16. Structure of production

  17. Structure of production

  18. Structure of production

  19. Structure of production There is a strong relationship between structure and growth: • HT and MT sectors have a larger share in developed countries • Developing countries move towards MT industries • Fast growing countries achieve the fastest structural change and move towards HT industries

  20. Structure of exports

  21. Structure of imports

  22. Structure of exports

  23. Structure of imports

  24. Structure of exports

  25. Structure of imports

  26. Structural convergence • Any convergence in industrial structure? • Do the structures of industry in developed and developing countries get “similar”? • Apply factor analysis to identify “ideal-typical” structures • 5-year averages

  27. Structural convergence

  28. Structural convergence Three groups of countries • Club 1: Industrialized countries • Club 2: Less industrialized countries • Club 3: Transition club All clubs change their structures but there is no structural convergence. Some countries switch from one club to another over time.

  29. Club 1

  30. Club 2

  31. Club 3

  32. Industrial structure, 1965-69

  33. Industrial structure, 1995-99

  34. Export structure, 1980-84

  35. Export structure, 1995-99

  36. Conclusions • Strong correlation between industrial structure and performance • Strong correlation between the speed and direction of structural change and industrial performance

  37. Conclusions • Industry structure changes in both developed and developing countries • There is no structural convergence • Trade structure is more specialized • Developing country structure is more specialized • Persistence in international division of labor

  38. Thanks….

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