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Structural change, labor productivity growth, and convergence of BRIC countries

Vatthanamixay Chansomphou and Masaru Ichihashi
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Vatthanamixay Chansomphou: Graduate School for International Development and Cooperation

No 3-5, IDEC DP2 Series from Hiroshima University, Graduate School for International Development and Cooperation (IDEC)

Abstract: In this study, we seek to understand the patterns of structural change, labor productivity growth and convergence in BRIC countries. In the first part, we employ the dataset of labor productivity from de Vries et al. (2012) and the Groningen Growth and Development Center (2013) and utilize the shift and share analysis to investigate the contribution of within shift, static shift and dynamic shift effects on growth of labor productivity. In the second part, we use the convergence tests to check for the cross-country convergence in each economic sector. Our aggregate shift-share decomposition results report that labor productivity growth within sector itself is the main source of aggregate growth, while an effect of labor movement exists (shift effect) but not substantial. Among BRIC, we found that, during 1980-2008, China had the highest rate of labor productivity growth, following by India, Russia, and Brazil, respectively. The results of the convergence analysis show that service sectors in BRICs have faster catching-up rates than industrial sectors, and there is no convergence in agriculture. Among service sectors, financial, insurance, and real estate sector has highest speed of convergence. The BRICs results are then used to compare with the four OECD countries f results. It is found that in OECD countries, the sectors that converge fastest are mining and finance, insurance, and real estate. Nevertheless, the magnitudes of speed of convergence in OECDs are not comparable to BRICs. This confirms the growth theory in that less developed countries converge faster than developed nations. In sum, our findings imply that service sectors are the driving force of economic growth and economic convergence in BRICs.

Keywords: Structural change; shift-share analysis; sectoral convergence; BRICs (search for similar items in EconPapers)
JEL-codes: C80 N10 O10 O11 O41 O47 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2013-08
New Economics Papers: this item is included in nep-cis, nep-eff, nep-fdg, nep-lam, nep-ltv, nep-neu, nep-pbe and nep-tra
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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