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Growth in a dual economy

  • Blomstrom, Magnus
  • Wolff, Edward N.

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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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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  1. Magnus Blomstrom & Edward N. Wolff, 1989. "Multinational Corporations and Productivity Convergence in Mexico," NBER Working Papers 3141, National Bureau of Economic Research, Inc.
  2. Blomstrom, Magnus & Wolff, Edward N., 1997. "Growth in a dual economy," World Development, Elsevier, vol. 25(10), pages 1627-1637, October.
  3. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  4. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  5. 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.
  6. 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.
  7. David Dollar & Edward N. Wolff, 1993. "Competitiveness, Convergence, and International Specialization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041359, June.
  8. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
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