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Does the Capital Intensity of Structural Change Matter for Growth?

Author

Listed:
  • Jacob Braude

    (Bank of Israel)

  • Yigal Menashe

    (Bank of Israel, Tel-Aviv University)

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.

Suggested Citation

  • Jacob Braude & Yigal Menashe, 2004. "Does the Capital Intensity of Structural Change Matter for Growth?," Bank of Israel Working Papers 2004.10, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2004.10
    as

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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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