The historical roots of India’s service-led development: A sectoral analysis of Anglo-Indian productivity differences, 1870-2000

India fell further behind the UK in terms of GDP per capita and overall labour productivity between the 1870s and the 1970s, but has been catching-up since. This paper offers a sectoral analysis of these trends. Comparative India/UK labour productivity in agriculture has declined continuously, and agriculture still accounts for around two-thirds of employment in India. Agriculture thus played a key role in India’s falling behind and has subsequently slowed down the process of catching up. Although there have been substantial fluctuations in comparative India/UK labour productivity in industry, this sector has exhibited no long run trend. The only sector to exhibit an upward trend in comparative India/UK labour productivity is services. India’s recent emergence as a dynamic service-led economy thus appears to have long historical roots. Although India has been characterised by relatively low levels of physical and human capital formation overall, its education provision has historically been unusually skewed towards secondary and tertiary levels. This has provided a limited supply of high productivity workers who have been employed predominantly in services.     

Agricultural distortions and structural change

Many developing countries have chosen to use a variety of policy instruments to transfer resources out of agriculture and to the manufacturing and, in some countries, the service sector. It will be argued in this paper that such policies slow structural change, create incentives for capital intensive production in non-agricultural sectors, and slow the process of technical innovation in agriculture. These arguments will be illustrated by examining the recent growth experience in India.     

技术进步、效率变化、资本积累与我国地区服务业发展

本文用非参数生产前沿方法将我国1978—2007年服务业劳均产出增长分解为效率变化、技术进步和资本积累的贡献三个部分,并用方差分解方法估算了各部分对地区服务业劳均产出增长率差异的贡献,然后采用核密度分布方法分析了上述三个部分对地区服务业发展的影响。研究发现：（1）技术进步是促进各地区服务业增长的重要因素,其作用随资本积累的提高呈上升趋势;（2）效率虽然对服务业经济增长的平均贡献较小,但却是各地区服务业增长率差异的主要原因;（3）资本积累在不同时期对地区服务业增长的贡献差别很大,其作用随时间发展呈上升趋势。     

Turkish Clothing in Amsterdam: The Rise and Fall of a Perfectly Competitive Labour Market

While the Dutch textile industry declined rapidly, Turkish entrepreneurs created a growing industry for fashion goods with highly flexible demand in an informal sector that was initially tolerated by the authorities and attracted many undocumented immigrants. It led to the unusual spectacle of a labour market visibly in perfect competition; predictions of that model are clearly supported. Crackdown of the authorities led to the demise of the sector: production, capital, and labour all proved internationally mobile.     

COLONIALISM AND LONG‐RUN GROWTH IN AUSTRALIA: AN EXAMINATION OF INSTITUTIONAL CHANGE IN VICTORIA'S WATER SECTOR DURING THE NINETEENTH CENTURY

Institutional change in water rights in the nineteenth century Australian colony of Victoria raised institutional efficiency, which contributed to long‐run economic growth. High‐quality human capital and the extension of voting rights (franchise) were crucial for efficient institutional change in the water sector. Quality human capital (literacy) appeared to increase the rural population's awareness of the economic impact of the existing structure of water rights that may have constrained growth in the agricultural sector and reduced investment incentives. Extension of the franchise allowed the rural population to exert political pressure for enactment of change in water rights, which resulted in efficiency‐enhancing policies and efficient institutions. The findings show these two factors were more important than Victoria's British colonial heritage in determining whether growth‐enhancing institutional change took place.     

Shared Sectoral Growth Versus the Dual Economy Model: Evidence from Côte d'Ivoire,Ghana, and Zimbabwe

Abstract: Though recently challenged, the dual economy view has affected development economics and development policy, either explicitly or implicitly, for more than half a century. According to this view, agriculture merely serves to build the industrial sector — in particular, agriculture has no role as an engine of growth in the long term. Examining agriculture, industry and service sector growth in Côte d'Ivoire, Ghana, and Zimbabwe over more than three decades, we find little empirical support for this view. On the contrary, our analyses find a large degree of interdependence in long‐run sectoral growth, implying that the sectors ‘grow together’ or, similarly, that there are externalities or spillovers between sectors. Policy implications are also discussed; these include directing more attention towards the interdependencies in sectoral growth broadly defined. In particular, our findings have implications for the design of education and health programs, as well. This improved understanding of inter‐sectoral dynamics at all levels may facilitate policy implementation aimed at increasing economic growth — and thereby ultimately improving peoples' livelihoods — in Africa and elsewhere.     

Service sector development in Asia: an important instrument of growth

The under-developed service sector in Asia has the potential to become a new engine of economic growth for developing Asia, which has for a long time relied on export-oriented manufacturing to power its growth. The study seeks to achieve three objectives. First, to provide a comprehensive analysis of the service sector by detailing industry trends, its growing importance to the region, its synergy with industry, and its ability to achieve more inclusive growth. Second, to highlight productivity concerns in the sector and propose relevant strategies for achieving greater productivity gains. Finally, to establish a set of policy provisions based around the infrastructural, human capital, and regulatory gaps that exist across the Asian service sector. Overall, the analysis provides substantial cause for optimism about the role of the service sector as an engine of growth in Asia.     

Economic policy and population change in Thailand

This paper argues that in Thailand a link can be demonstrated between the recent fertility decline and an economic policy variable, the rice premium. The rice export tax introduced a check to profitability in rice agriculture, leading capital and also entrepreneurial talent out of agriculture into the urban industrial sector; keeping the structure of agriculture small-scale peasant holdings; and permitting labour costs to remain low in the urban industrial sector. Other government policies plus foreign investment and US aid led to rapid industrial growth, which coupled with consolidation of the transportation and communication systems triggered massive rural to urban migration. As Bangkok became a modern industrial metropolis, complete with urban sprawl, traffic congestion, and smog, the micro-economic cost—benefit equation turned against large families for many urban couples. Fertility fell rapidly in the urban areas, and this decline has spread into the countryside. The rice export tax thus has had profound demographic as well as economic effects.     

Financing China’s cotton textile industry: 1890–1936

The cotton textile industry was the primary source of Britain’s industrial revolution and Japan’s economic takeoff. The Chinese domestic mechanized cotton textile industry experienced a boom during the interwar period and became the leading industry in the manufacturing sector, although it failed to gain domestic leadership against Japanese funded firms. There is a debate on the role of external finance on firm growth both in the contemporary context and historical cotton textile industry context. The literature offers several competing hypotheses on the relationship between capital and industry growth such as “modernization”, “oppression” and “efficiency” argument. Our empirical results using firm level data between return of capital and the size of the capital indicate a clear positive effect of external finance on firm growth. This supports the “modernization” hypothesis and suggests that the causes of the mediocre performance of the Chinese-owned spinners relative to Japanese mills may have been mismanagement, undercapitalization, lack of reinvestment incentives, and low labor productivity etc.     

Identifying the woes of the cotton textile industry in Bengal: tales of the nineteenth century

This article seeks to answer three basic questions about the nineteenth‐century cotton textile industry in Bengal that still remain unresolved in the literature; namely, when did the industry begin to decay, what was the extent of its decay during the early nineteenth century, and what were the factors that led to this? In the absence of data on production, this article seeks to settle the debate on the basis of the industry's market performance and its consumption of raw materials. It contests the prevailing hypothesis that the industry's perpetual decline started in the late eighteenth or the early nineteenth century. Instead, it is argued that the decline started around the mid‐1820s. The pace of its decline was, however, slow though steady at the beginning, but reached crisis point by 1860, when around 563,000 workers lost their jobs. Regarding the extent of its decay, this article concludes that the industry was diminished by about 28 per cent by the mid‐1800s. However, it survived in the high‐end and low‐end domestic markets. Evidence is also gathered in favour of the hypothesis that, although British discriminatory policies undoubtedly depressed the industry's export outlet, its decay is better explained by technological innovations in Great Britain.     

Catching up to the European core: Portuguese economic growth, 1910–1990

This paper analyses the causes of Portuguese catching-up to the European core, in the 20th century, within a growth accounting framework. It concludes that investment in human and physical capital was the main driving force of economic growth and that variation in output growth rates are attributable to changes in total factor productivity growth. The paper explains the decline in TFP growth after 1973 in terms of structural change in the industrial sector.     

The Role of Agriculture on the Recent Brazilian Economic Growth: How Agriculture Competes for Resources

Drawing upon the Global Trade Analysis Project (GTAP) database, and other time series data, we construct a multi‐sector Ramsey model that shows the transition growth of the Brazilian agricultural sector and its effects on growth of the industrial and service sector of the economy, with particular emphasis given to the years 1994–2010. Our results capture the importance of the agriculture's capital intensity and the sector's factor productivity on the sector's growth, the substitution of capital for labor in agriculture, and the sustaining of agriculture's share in Brazilian GDP. These features are rather unique among emerging economies, most of which have experienced a transition out of agriculture and growth in nonfarm production relative to agriculture.     

承接服务业国际转移与中国服务业人力资本提升研究

近几年来随着服务业的快速发展,承接服务业国际转移对人力资本的提升作用也不断显现。文章首先从理论角度分析了服务业国际转移如何促进我国服务业人力资本的提升,接着通过实证进一步验证了前文的理论分析,结果表明,承接服务业国际转移能够促进中国服务业人力资本的发展,进而提出大力发展服务业的相关政策建议。     

The factor income distribution in China: 1978–2007

This paper investigates changes in aggregate labor share in China during 1978 and 2007 with a particular focus on the 1995–2007 period during which official statistics report a drop of 12.45 percentage points in labor's share of national income (labor share). Our main findings are: (1) The reported fall in aggregate labor share is overstated. According to the official statistics released by the NBS (2007a), the labor share fell 5.25 percentage points from 2003 to 2004. However this dramatic decline, 42.16% of the total reported decline of the labor share from 1995 to 2007, is completely due to the changes in the way NBS break down the operating surplus state-owned and collective-owned farms and the mixed income of the owners of individual economy; (2) For the last three decades, two main forces have been driving shifts in the aggregate labor share: (i) structural transformation between the agriculture and non-agriculture sectors and (ii) shifts in the labor share within the industry sector; (3) From 1995 to 2003, these two effects are both negative and together drive down aggregate labor share by 5.48 percentage points. The structural change explains 61.31% of the decline and the remaining 38.69% of the decline is due to the changes in the labor share within sectors, primarily in the industry sector; (4) Labor share in agriculture is lower than labor share in services. Therefore, when the service sector grows relative to the agriculture sector in the economy, the aggregate labor share of income declines; and (5) Restructuring of the SOEs and expanded monopoly power are the main reasons for the decline of labor share within industry after 1998. Relative price shifts, the factor input ratio, and biased technological progress are all insignificant forces for this decline because the substitution between factors in the industry sector is nearly unit elastic.     

Industrialisation in a small grain economy during the First Globalisation: Bulgaria c. 1870–1910

In Bulgaria the share of secondary production in GDP remained constantly low between c. 1870–1910. To explain the country's exceptionally weak growth, we use endogenous and unified growth theory. Gerschenkron and Palairet blame a self-sufficiency-oriented peasant economy for rising labour and raw material costs in industry, which destroyed the competitiveness of Bulgarian manufacturing and prevented industrialisation. We refute the existence of any long-lasting cost increases in industry after 1878. Quite the opposite was true: the expansion of Bulgaria's secondary sector was restricted by detrimental changes on the demand side, for which peasants were not responsible. Recent research claims that, around 1910, Bulgarian textile production was significantly lower than in 1870. Our study brings to light new data and information that clearly disproves this view. Until around 1910, a booming modern manufacturing sector more than replaced the country's proto-industries’ textile outputs, which had plummeted dramatically during the early years of the newly founded Bulgarian state. However, as the rise of modern manufacturing in textile production coincided with the decline of the entire large sector of traditional manufacturing, secondary production as a whole stagnated.     

The rise of the service sector in China

This paper analyzes the underlying mechanisms that explain the rise of the service sector in China. Along with China’s unprecedented growth, the rapid expansion of its service sector is one of the fastest among emerging countries. However, the literature has yet to offer a clear understanding of such expansion. We show that distribution services first grow with the manufacturing sector, followed by personal services as per capita income rises. Motivated by this growth pattern, this paper provides a theory that describes 1) the complementarity between distribution services and the manufacturing sector, and 2) the substitution between personal services and home production. Empirics show that the personal service sector is the key to account for the early and rapid rise of the service sector in China. Quantitatively, high productivity growth and high capital intensity in the personal service sector, and labor market frictions are the most important channels. By revealing the growth pattern of the service sector in the early stages of development, the paper thereby contributes to the growing literature on the rising importance of the service economy.     

关于中国纺织业转型与升级的思考

纺织业作为我国的传统产业,对国民经济的发展发挥着非常重要的作用。自20世纪80年代以来,纺织品服装出口一直处于全国首位,其进出口贸易的巨额顺差成为我国外汇收入和资金积累的重要来源。但是人民币持续升值,出口退税率下调,企业成本大幅度上升,美国次贷危机引发经济衰退等,使中国纺织业面临了前所未有的严峻考验与危机。本文从纺织发展的相关理论出发,结合我国纺织业的现状,提出了关于我国纺织业转型的一些建议。     

International competition in the first wave of globalization: new evidence on the margins of trade

We pose a seemingly ageless question in economic history. To what extent did new entrants in the late nineteenth‐century cotton‐textile industry threaten the customary markets of the European core? Exploiting a newly constructed dataset on textile imports to Spain, we find that as trade costs fell, new rivals began to sell a greater variety of products. Along this dimension, competition can be said to have increased. In response, producers in Europe adjusted the type and number of goods exported. By 1914, specialization mapped onto endowments of skilled labour, capital, and access to raw materials. While firms in new industrializing countries exported low‐end varieties, incumbents in the core shipped high‐end goods, unit values increasing with levels of development.     

The Role of Human Capital in Economic Development: Evidence from Taiwan

The use of Taiwanese industrial data to investigate two potentially important roles of human capital on long-run economic growth (i.e. factor accumulation and technology progress), we find that human capital accounts for 46% of output growth in aggregate manufacturing industry and from 23 to 84% in two-digit industries. Significant knowledge spillover effects were found within Taiwan's manufacturing sector. For aggregate manufacturing, a roughly 29% of total rate of return to education gives a private return of 7% while the external knowledge spillover effect is 22%. For the two-digit industries, the inter-industry effect of education measures two to three times its intra-industry effect. Contrary to the Lau-Young proposition, we find that technology change in terms of knowledge spillover contributes 39% to the output growth of Taiwan's aggregate manufacturing and from 12 to 42% to that of the two-digit industries. Our results also suggest that, in the presence of externalities, growth accounting based on macro data may be misleading in interpreting the sources of growth.
In addition, the case study of Taiwan suggests that opening trade broadens opportunities, and hence increases the return on human-capital investment. However, our estimation results also suggest that in terms of capturing the growth benefits from trade, threshold levels of human capital exist in most industries.     

Facts and myths about Korea's economic past

The orthodoxy in South and North Korean historiography states that Japan's annexation of Korea in 1910 wrought havoc on indigenous economic development and started an era of exploitation lasting until 1945. Recent studies show the claim to be based less upon facts than upon Marxist dogma and nationalist sentiment. During the nineteenth century, Korea was not on the verge of modern economic growth, but in demographic and economic decline. Living standards improved and industrialisation occurred in the context of rapid population growth during the colonial period due to transfer of capital and advanced technology from Japan.