Does the Capital Intensity of Structural Change Matter for Growth?

Jacob Braude () and Yigal Menashe ()
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Jacob Braude: Bank of Israel
Yigal Menashe: Bank of Israel, Tel-Aviv University

No 2004.10, Bank of Israel Working Papers from Bank of Israel

Abstract: Ventura (1997) offers an explanation for the success of the Asian Tigers in sustaining exceptional growth rates over an extended period based on capital accumulation alone. He points to their ability as export-oriented economies to exploit the accumulated capital to reallocate from labor-intensive to capital-intensive sectors instead of raising the capital intensity within each sector. We test this argument using industry-level data on manufacturing in 33 countries over three decades. The evidence on the argument is mixed. We identify two stages in the evolution of the structural change in the Tigers. It was labor intensive initially and became capital-intensive in the 1980s. Compared to other countries, the Tigers are exceptional in the extent of their shift from a labor-intensive to a capital intensive structural change during the sample period. However, structural change in the 1980s accounted for only a negligible part of capital accumulation in manufacturing. When tested in growth regressions the capital-intensity of structural change does not have a significant positive effect on growth. The effect may actually be negative.

Keywords: Asian miracle; structural changes; capital accumulation; sustained growth; capital intensity (search for similar items in EconPapers)
JEL-codes: C31 C33 E22 F43 N15 O47 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2004-09
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