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

Author

Listed:
  • Vatthanamixay Chansomphou

    (Graduate School for International Development and Cooperation)

  • Masaru Ichihashi

    (Graduate School for International Development and Cooperation)

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.

Suggested Citation

  • Vatthanamixay Chansomphou & Masaru Ichihashi, 2013. "Structural change, labor productivity growth, and convergence of BRIC countries," IDEC DP2 Series 3-5, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
  • Handle: RePEc:hir:idecdp:3-5
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    References listed on IDEAS

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    1. Dale W. Jorgenson & Marcel P. Timmer, 2011. "Structural Change in Advanced Nations: A New Set of Stylised Facts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 1-29, March.
    2. Margaret S. McMillan & Dani Rodrik, 2011. "Globalization, Structural Change and Productivity Growth," NBER Working Papers 17143, National Bureau of Economic Research, Inc.
    3. Peneder, Michael, 2003. "Industrial structure and aggregate growth," Structural Change and Economic Dynamics, Elsevier, vol. 14(4), pages 427-448, December.
    4. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-698, June.
    5. de Vries, Gaaitzen J. & Erumban, Abdul A. & Timmer, Marcel P. & Voskoboynikov, Ilya & Wu, Harry X., 2012. "Deconstructing the BRICs: Structural transformation and aggregate productivity growth," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 211-227.
    6. Boussemart, Jean-Philippe & Briec, Walter & Cadoret, Isablelle & Tavera, Christophe, 2006. "A re-examination of the technological catching-up hypothesis across OECD industries," Economic Modelling, Elsevier, vol. 23(6), pages 967-977, December.
    7. Timmer, Marcel P. & Szirmai, Adam, 2000. "Productivity growth in Asian manufacturing: the structural bonus hypothesis examined," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 371-392, December.
    8. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-1238, December.
    9. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
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    Cited by:

    1. Qi, Tianyu & Winchester, Niven & Karplus, Valerie J. & Zhang, Da & Zhang, Xiliang, 2016. "An analysis of China's climate policy using the China-in-Global Energy Model," Economic Modelling, Elsevier, vol. 52(PB), pages 650-660.
    2. Andres Kuusk & Karsten Staehr & Uku Varblane, 2015. "Sectoral change and labour productivity growth during boom, bust and recovery," Bank of Estonia Working Papers wp2015-2, Bank of Estonia, revised 30 Dec 2015.
    3. Andres Kuusk & Karsten Staehr & Uku Varblane, 2017. "Sectoral change and labour productivity growth during boom, bust and recovery in Central and Eastern Europe," Economic Change and Restructuring, Springer, vol. 50(1), pages 21-43, February.

    More about this item

    Keywords

    Structural change; shift-share analysis; sectoral convergence; BRICs;

    JEL classification:

    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • 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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