Globalization, Structural Change and Productivity Growth

Margaret McMillan and Dani Rodrik

No 17143, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, we document these gaps, and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. Our results show that since 1990 structural change has been growth reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries' productivity performance and that of Asia is accounted for by differences in the pattern of structural change - with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. In our empirical work, we identify three factors that help determine whether (and the extent to which) structural change contributes to overall productivity growth. In countries with a relatively large share of natural resources in exports, structural change has typically been growth reducing. Even though these "enclave" sectors usually operate at very high productivity, they cannot absorb the surplus labor from agriculture. By contrast, competitive or undervalued exchange rates and labor market flexibility have contributed to growth enhancing structural change.

JEL-codes: O1 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-dev, nep-eff and nep-sea
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (571)

Published as “Globalization, Structural Change and Productivity Growth,” 2011. In Making Globalization Socially Sustainable, edited by Mark Bachetta and Marion Jansen, International Labor Organization, Geneva Switzerland. (with Dani Rodrik)

Downloads: (external link)
http://www.nber.org/papers/w17143.pdf (application/pdf)

Related works:
Working Paper: Globalization, structural change, and productivity growth (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17143

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17143

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().