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Growth in a dual economy

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  • Blomstrom, Magnus
  • Wolff, Edward N.

Abstract

Growth and structural transformation of the manufacturing sector in developing countries are generally considered to be the result of the expansion of the `modern' (large-scale) sector relative to the `traditional' (small-scale) sector. Examining the sources of labour productivity growth in Mexican manufacturing, however, does not provide support for this conclusion. Although we find that labour productivity levels vary almost in direct relation to establishment size, labour productivity growth shows no systematic variation by size class. In fact, small establishments have had the same rate of labour productivity growth as larger ones, partly because of the `excise-effect' (the exiting of low-productivity, small plants). Moreover, most of the variation in labour productivity across plant class sizes is found to be due to differences in capital intensity. The variation in TFP levels across size classes tends to be small. Thus, our results remove some justification of the policy measures that favour large firms in developing countries.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 25 (1997)
Issue (Month): 10 (October)
Pages: 1627-1637

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Handle: RePEc:eee:wdevel:v:25:y:1997:i:10:p:1627-1637

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Web page: http://www.elsevier.com/locate/worlddev

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References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Blomström, Magnus & Wolff, Edward N, 1994. "Growth in a Dual Economy," CEPR Discussion Papers 861, C.E.P.R. Discussion Papers.
  3. Magnus Blomstrom & Edward N. Wolff, 1994. "Multinational Corporations and Productivity Convergence in Mexico," NBER Working Papers 3141, National Bureau of Economic Research, Inc.
  4. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  5. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  6. David Dollar & Edward N. Wolff, 1993. "Competitiveness, Convergence, and International Specialization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041359.
  7. Patricio Meller, 1976. "Efficiency Frontiers for Industrial Establishments of Different Sizes," NBER Chapters, in: Explorations in Economic Research, Volume 3, number 3, pages 77-105 National Bureau of Economic Research, Inc.
  8. Ranis, Gustav, 1988. "Analytics of development: Dualism," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 4, pages 73-92 Elsevier.
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Citations

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Cited by:
  1. Dijk, van M., 2001. "The Determinants of Export Performance in Developing Countries: The Case of Indonesian Manufacturing," Eindhoven Center for Innovation Studies (ECIS) working paper series 02.01, Eindhoven Center for Innovation Studies (ECIS).
  2. Blomström, Magnus & Wolff, Edward N, 1994. "Growth in a Dual Economy," CEPR Discussion Papers 861, C.E.P.R. Discussion Papers.
  3. Michiel Van Dijk & Adam Szirmai, 2005. "Catch Up at the Micro-Level: Evidence from an Industry Case Study Using Manufacturing Census Data," DEGIT Conference Papers c010_038, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Dijk van, M., 2003. "Industry Evolution in Developing Countries: the Indonesian Pulp and Paper Industry," Eindhoven Center for Innovation Studies (ECIS) working paper series 03.02, Eindhoven Center for Innovation Studies (ECIS).
  5. Dijk van, M. & Szirmai, A., 2005. "Industrial Policy and Technology Diffusion: Evidence from Paper Making Machinery in Indonesia," Eindhoven Center for Innovation Studies (ECIS) working paper series 05.15, Eindhoven Center for Innovation Studies (ECIS).
  6. Stefania P. S. Rossi & Guido Pellegrini & Ornella Tarola, 2006. "Macroeconometric modelling for evaluationg the policy impact on growth in dualistic countries: the case of Southern Italian Regions," Vienna Economics Papers 0607, University of Vienna, Department of Economics.
  7. Szirmai, Adam & Van Dijk, Michiel, 2007. "The Micro-Dynamics of Catch Up in Indonesian Paper Manufacturing: An International Comparison of Plant-Level Performance," UNU-MERIT Working Paper Series 010, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.

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