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Catching Up, Structural Transformation, and Inequality: Lessons from Asia

Author

Listed:
  • Bruno Martorano

    (Institute of Development Studies)

  • Donghyun Park

    (Asian Development Bank)

  • Marco Sanfilippo

    (University of Antwerp)

Abstract

While structural transformation, driven by technological progress, productivity growth, and capital deepening, has contributed to Asia’s sustained rapid growth, its effect on income inequality is uncertain. The central objective of our paper is to empirically examine the effect of structural change on wage inequality in Asia, using industry-level data for three skill groups of workers. Our evidence indicates that structural change, pushed by productivity catch-up with advanced economies, capital deepness, and the shift of the economic structures to more skill-intensive industries, has exacerbated inequality in the region. However, we also find that policy responses, especially investment in education matching the higher demand for skills and competitive exchange rates, can mitigate the increase in inequality.

Suggested Citation

  • Bruno Martorano & Donghyun Park & Marco Sanfilippo, 2016. "Catching Up, Structural Transformation, and Inequality: Lessons from Asia," ADB Economics Working Paper Series 488, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0488
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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