Comparisons of agricultural productivity growth in China and India

We measure and compare agricultural total factor productivity (TFP) growth and its components (efficiency and technical change) in China and India and test the TFP series for the existence of structural breaks relating the evolution of TFP to policy milestones. Our results show that agricultural TFP growth accelerates in China after 1979 and in India after 1974, although China’s agricultural sector clearly outperforms India’s. The main explanation of these differentials is that agricultural growth in China benefited from more fundamental institutional and policy reforms in agriculture than India. There is some evidence that the transformation of industry in China was also important for agricultural TFP growth. Manufacture growth absorbed labor and reduced employment in agriculture, creating incentives for capital investment and technical change that kept output per worker in agriculture growing at high rates. Fewer changes in agricultural policies and in the dynamics of manufacturing in India resulted in slower growth in agricultural productivity, despite policy changes that accelerated economic growth in recent years.     

De-industrialization and comparative advantage in the global value chain

We investigate the causes of de-industrialization and potential for re-industrialization using trade-linked input–output data from WIOD. By introducing a new global value chain measure of comparative advantage, we relate a sector's share in domestic final demand to that in production and separate the direct effect of trade on its income share. This method identifies the declining share of manufacturing value added in domestic final expenditures to be the main cause of de-industrialization. Differences in comparative advantage between countries do matter, especially in the case of employment shares, but have a limited impact via the direct trade effect on value added. The findings point to a peculiar paradox of industrial policy: precisely when it is successful in raising competitiveness and hence productivity growth of manufacturing, it also furthers the global decline of relative prices in manufacturing. In contrast to the national objectives of re-industrialization, effective industrial policies accelerate de-industrialization in the global economy.     

The Fading Attraction of Central Regions: an Empirical Note on Core–Periphery Gradients in Western Europe

Abstract

This paper describes sectoral core–periphery gradients across Western European regions over the period 1975–2000, and it estimates the impact of EU membership on countries’ internal geography. Overall, it is found that the centrality of European regions has been losing importance as a determinant for the location of employment. Central regions have gained employment share in none of the eight broad sectors analysed, whereas peripheral regions have significantly gained employment share in four of these sectors. Accession to the EU has favoured countries’ peripheral regions in terms of manufacturing employment and their central regions in terms of service employment.     

Drivers of change in the European youth employment: a comparative structural decomposition analysis

This paper uses a structural decomposition approach to examine the proximate causes of change in the EU15 youth workforce from 1995 to 2011. Besides the traditional sources considered by the literature, I include age-specific factors: a labor utilization index that accounts for the hours that employed youth work by showing the extent of part-time contracts; an age mix factor that indicates the share that youth comprise of total employment and, finally, changes in the inverse of the overall sectoral labor productivity, which describes variations in total labor demand. By applying this approach, I identify the core drivers behind the recent changes in the evolution of youth employment in each of the 15 countries; this is crucial for tailoring policy strategies. Results suggest that to foster youth employment, most Mediterranean countries should implement youth-specific measures while other EU15 countries could do so by enhancing overall employment.     

Agriculture and development: A brief review of the literature

After 20 years of neglect by international donors, agriculture is now again in the headlines because high food prices are increasing food insecurity and poverty. In the coming years, it will be essential to increase food productivity and production in developing countries, especially in Sub-Saharan Africa and with smallholders. This, however, requires finding viable solutions to a number of complex technical, institutional, and policy issues, including land markets, research on seeds and inputs, agricultural extension, credit, rural infrastructure, connection to markets, rural non-farm employment, trade policy and food price stabilization. This paper reviews what the economic literature has to say on these topics. It discusses in turn the role played by agriculture in the development process and the interactions between agriculture and other economic sectors, the determinants of the Green Revolution and the foundations of agricultural growth, issues of income diversification by farmers, approaches to rural development, and issues of international trade policy and food security, which have been at the root of the crisis in agricultural commodity volatility in recent years.     

Productivity effects on Mexican manufacturing employment

We examine the effects of labor productivity and total factor productivity (TFP) on employment across 25 Mexican manufacturing industries from 1984 to 2000. Employing panel data methods, several interesting findings emerge. First, we observe a strong and positive impact of NAFTA on employment. Second, productivity exerts a procyclical, positive effect on employment but this effect becomes smaller after NAFTA. Third, partitions of our sample according to capital-labor intensity suggest that industries which are less capital-intensive were affected negatively on impact by NAFTA but that productivity impacted employment positively after NAFTA. In contrast, more capital-intensive industries display these results in reverse.     

Labour productivity and employment in Australian manufacturing SMEs

This paper examines the relationship between labour productivity and employment in Australian manufacturing small and medium enterprises (SMEs). The results indicate that labour productivity of SMEs varies substantially between industries within the manufacturing sector, but on average labour productivity for manufacturing SMEs increased at a faster rate than that of large manufacturing enterprises across all industries. All manufacturing industries except one recorded employment growth during the period under study. However like labour productivity growth, employment growth also varies across industries within the manufacturing sector. Yet the study could not establish any definite relationship between labour productivity growth and employment. This finding is consistent with some previous studies.     

International Leadership in Productivity at the Aggregate and Industry Level

Since many policies affect specific parts of economies differently, it is useful to decompose GDP per capita differences across countries into differences across smaller and smaller parts of economies. In this paper, we summarize recent contributions in this area and fit them together into a decomposition procedure for GDP per capita differences. The overall finding is that the U.S. is the productivity leader for the most of the economy. Moreover, international productivity differences at the aggregate level of the economies are in most cases translated into differences in the productivity of industries, at least compared to the productivity leader U.S. The variability of productivity differences at the industry level is, however, substantially higher than any differences at the aggregate or sector level. For the manufacturing sector alone the U.S. and Japan share the leadership on the industry level. In contrast, France, U.K., and Germany exhibit almost no leadership in productivity at the industry level. Hence, nation-specific factors appear to be dominant in the comparison of European countries with the U.S. Finally, mix differences do not play a very large role for big countries. For Germany, however, the mix effect can help to reconcile relative high productivity for the market economy and lower productivity at disaggregated levels.     

Servitization across countries and sectors: Evidence from world input-output data

This paper uses the supply tables underlying WIOT data to explore the provision of services by manufacturing. The service shares differ substantially across countries and sectors, while they remain largely stable over time. A latent class analysis assigns broadly defined manufacturing sectors to economy-wide growth models, differentiating between service- and manufacturing-driven models in catching-up and developed economies. Servitization increases with labor productivity. The service intensities in the sectoral production mix are lower in countries with higher manufacturing shares. This holds for both catching-up and developed economies. However, servitization is largely unrelated to productivity and employment growth. We therefore argue that the degree of servitization is contingent on and an attribute of the respective economic model in which a sector operates.     

THE IMPACT OF LABOR MARKET REGULATION ON EMPLOYMENT IN LOW‐INCOME COUNTRIES: A META‐ANALYSIS

Controversy over labor market policy often centers on achieving a balance between preventing worker exploitation, and avoiding loss of productivity or employment through excessive regulation. Although the literature documenting the impact of labor market regulation on employment is extensive, there is a dearth of evidence on the impact of such policies in low‐income countries (LICs). Since it is easier for workers, especially women, to slip into the informal sector in LICs, regulations are likely to have stronger impacts on formal employment in these countries (but lower impacts on unemployment). We systematically reviewed available research from countries that are, or were until recently, LICs. Most studies document that more stringent labor regulations are associated with lower formal sector employment and higher informal sector employment. We also conducted a metaregression analysis of the impact of minimum wages on formal and informal employment. After controlling for publication bias, higher minimum wages are associated with lower formal employment and a higher share of informal workers.     

Productivity impacts of infrastructure development in Asia

This study investigates the impact of infrastructure capital on total factor productivity in selected Asian countries. The scope of the assessment is broadened by exploring the effect of infrastructure development on sectoral differences in total factor productivity. The study calculated the total factor productivity over the period 2006–2016 for 16 manufacturing industries in 19 Asian countries. Further, the impact of lagged infrastructure and endowment is also explored with an eye toward improving different infrastructural measures. The empirical findings show that lagged infrastructure and endowment exert a positive and significant impact on infrastructural improvement. The impact of telecommunications, road, and power infrastructure on sectoral productivity is investigated by applying the fully modified ordinary least squares estimation technique to control the endogeneity problem associated with infrastructure provision. Overall, the empirical findings show that infrastructure provision, particularly the provision of telecommunications and power, is an important factor for explaining patterns of comparative advantage, whereas the provision of roads is important to explain patterns of absolute advantage. The results further indicate that road infrastructure is more important for low technology-intensive industries, while power infrastructure is crucial for high technology-intensive industries.     

Spatio-temporal determinants of the structural and productive transformation of regions in Central and East European countries

This paper investigates the determinants of the structural (between-sectoral) and productive (within-sectoral) transformation of 56 NUTS2 regions in Central and East European (CEE) countries over the 2008–2014 period. Over the analysed period, a transformation of the analysed regions has taken place towards the tertiary sector and high value-added activities. The results from a spatial panel Durbin analysis reveal the existence of product-space linkages and point to a productive transformation towards high technology-intensive activities as an important driver of industrial development. Equal access to digital infrastructure in urban and rural areas and transfer of skills, knowledge and resources through the inflow of foreign investment and imports of production inputs increase the contribution of manufacturing to regional employment. The effect of profit tax reductions on the share of manufacturing employment is about five times larger than the effect of government subsidies to production.     

Localized Innovation and Productivity Growth in Asia: An Intertemporal DEA Approach

Recent contributions to growth theory stress the importance of localized innovation for the performance of more backward countries. In earlier papers, analyses by means of DEA techniques confirmed this intuition. In this paper, we extend this type of analysis by relaxing the macroeconomic viewpoint adopted until now. New databases on output, labor and capital input in the agricultural and manufacturing sectors are developed for 40 countries. Using intertemporal DEA, it is found that changes in the global production frontier are localized at high levels of capital intensity. This result is stronger in agriculture than in manufacturing. Further, a decomposition of labor productivity growth in eight Asian countries for the period 1975–1992 into the effects of capital intensification, learning and innovation is made. The results suggest that there is a particular development path in which increases in capital intensity appear to be a prerequisite to benefit from international technology spillovers.JEL Classification: O14, O30, O40, O47     

Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD Countries

This paper examines the empirical evidence on the impact of performed R&D and of R&D embodied in intermediate and capital goods on productivity performance in 10 major OECD countries over the last two decades. To quantify intersectoral and international technology flows, industry-level embodied R&D variables were constructed from an input–output (IO) R&D embodiment model. The productivity variables used are discrete Divisia growth indexes of total factor productivity (TFP), which were estimated from an IO growth accounting model. The results from pooled regressions indicate that the rates of return of the R&D variables were positively significant and increasing in the 1980s. In particular, embodied R&D is an important source for TFP growth in services, indicating very high social returns of the flows of capital-embodied technology into this sector. Moreover, the information and communi-cation technology (ICT) cluster of industries played a major role in the generation and cquisition of new technologies at the international level.     

The impact of EMU on bond yield convergence: Evidence from a time-varying dynamic factor model

This paper examines the dynamics of long term sovereign bond yields for 21 OECD countries. Following Del Negro and Otrok (2008), we estimate a dynamic factor model, with time varying parameters and stochastic volatility, that decomposes the observed variation in bond yields for each country into a common factor, a regional factor (EMU/non-EMU), and an idiosyncratic country specific factor. We find that prior to the financial crisis of 2008, the common factor played a dominant role for most countries in our sample. In the post financial crisis period there is substantial heterogeneity in the relative importance of the EMU and the idiosyncratic factors across different countries. For instance, our results suggest that there was a decoupling between the EMU and bond markets of the periphery economies of Greece, Ireland and Portugal in the post-2008 period. We find that after the onset of sovereign debt crises in these economies, the idiosyncratic factor assumed an important role in driving the bond yield variation. Thereafter, the EMU’s share in bond yield changes in Ireland and Portugal increased considerably since 2012, whereas for Greece the idiosyncratic factor continued to play a significant role in driving bond yields. In contrast, the EMU factor consistently played a dominant role in explaining bond yield changes in Italy and Spain, the other two economies that also experienced severe debt crisis during this period. We argue such differences in the importance of the EMU factor between core and periphery economies can be attributed to the systemic importance of core members for the EMU. This is indicated by our finding that bond yields and credit default swap (CDS) are less sensitive to changes in debt-GDP ratios in countries where the EMU factor played a larger role in the post-2008 period.     

Trade and factor intensity,and the transmission of the global shock to labor: A panel analysis of the fall of the labor income share in the Mexican manufacturing sector

The paper studies the fall of the labor income share in Mexico, contrasting the role of trade and factor intensity as transmission channels of the China shock of 2001. It finds that, while the skill, technological and —more surprisingly— trade intensity of Mexican industries were largely irrelevant, capital intensity played a key role: in particular, the higher was the industries’ initial capital intensity, the more vulnerable they were to the transmission of the global shock to labor. The finding is consistent with the proposition that industrial integration, concentrated in industries that are capital-intensive from the perspective of developing countries, facilitated the transmission of the shock. Results come from the estimation of panel equations for the annual change in the labor share across Mexican manufacturing industries, where transmission is measured by the correlation between changes in the United States and Mexican industry labor shares.     

Trade,technology and skills: Evidence from Turkish microdata

In this paper we report evidence on the relationship between trade openness, technology adoption and the relative demand for skilled labour in the Turkish manufacturing sector, using firm-level data over the period 1980–2001. In a dynamic panel data setting, using a unique database comprising data from 17,462 firms, we estimate an augmented cost share equation whereby the wage bill share of skilled workers in a given firm is related to international exposure and technology adoption.It emerges that R&D expenditures are positive and significantly related to skill upgrading. This result supports the skill-biased technological change argument in the case of a middle-income country such as Turkey.Moreover, the firm-level analysis reveals a positive impact of technological transfer from abroad, foreign ownership and exporting status on the demand for skills, highlighting the role of increasing international openness in fostering skill upgrading within firms.Our microdata also allow us to investigate the direct impact of import flows in shaping the relative demand for skills. The results show that those firms belonging to the sectors experiencing rapid increase in the share of inputs imported from industrialised countries also experience a higher increase in the labour cost share of skilled workers. This finding provides further support for the hypothesis that imports from industrialised countries imply a transfer of new technologies, in turn leading to a higher demand for skilled labour (the so-called skill-enhancing trade hypothesis).     

Brexit and FDI

• The potential for a departure from the EU to undermine the UK's attractiveness as a location for Foreign Direct Investment (FDI) is often cited as one of the key risks were the UK to leave the EU. In weighing up the threat to FDI posed by ‘Brexit’ we assess the net gain from inward investment and the role played by EU membership in attracting FDI.
• In theory, FDI benefits the economy via lower interest rates, higher wages for workers and ‘spillover’ benefits boosting economy‐wide productivity. But the evidence for these benefits is ambiguous. And FDI has potential drawbacks. These include an adverse effect on the tradeable sector, reflected in a wider current account deficit, the potential to ‘crowd out’ investment by domestic firms and the fiscal cost of subsidies paid to inward investors.
• That almost half of FDI in the UK comes from other EU countries suggests that EU membership is not the only driver of foreign investment in the UK. Other factors include the UK's business friendly environment, as reflected in global competitiveness surveys, and a relatively deregulated labour market. Of perhaps most importance is the lure provided by the UK's large domestic economy. 80% of FDI in the UK is in sectors where sales to the EU account for less than 10% of total demand.
• However, FDI in manufacturing does look vulnerable to Brexit, given the importance of the EU market. Granted, manufacturing accounts for a modest share of UK FDI. But to the extent that FDI boosts productivity, a loss of inward investment in this sector is likely to come at a disproportionate cost.
• Our modelling suggests that in a worst case Brexit scenario, the stock of FDI could ultimately be 7% lower relative to the UK remaining in the EU, potentially knocking around ½% off the level of GDP.

     

Market Services: Productivity Benchmarks for the UK

This paper presents comparisons of labour productivity (value added per hour worked) in market services for the UK, the US, France and Germany in 1993. Market services, defined as (1) Distribution, Hotels and Catering, (2) Transport and Communications and (3) Finance, Insurance and Real Estate, make up 34–43 percent of total employment in the four countries. For productivity in market services overall, the US led the UK by 35 percent in 1993, Germany led the UK by 34 percent and France led the UK by 36 percent. The UK productivity shortfall vis-à-vis Germany and France was wider in market services than in manufacturing.     

Reforms and agricultural productivity in Central and Eastern Europe and the Former Soviet Republics: 1989–2005

This paper analyses the changes in agricultural performance in Central and Eastern Europe and the Former Soviet republics since the start of the transition process. We provide a conceptual framework for the evolution of productivity and efficiency measures and link this evolution to the issue of factor abundance taking into account specific transition characteristics. We document the changes in agricultural performance using empirical data on the evolution of partial productivity and total factor productivity estimates and we illustrate how productivity varies between countries at various stages of the transition process. Over the past twenty years, virtually all transition countries witnessed an initial decline in productivity, and virtually all countries currently witness an increase in productivity. However, the depth and length of the initial decline differs enormously between countries. Our analysis indicates that the productivity changes were related to the extent of the pre-reform distortions, initial resource endowments and technology use, and the reform implementation in the countries.