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Manufacturing and Economic Growth in Developing Countries, 1950-2005

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  • Szirmai, Adam

    () (UNU-MERIT/MGSoG, Maastricht University)

  • Verspagen, Bart

    () (UNU-MERIT, and School of Business and Economics, Maastricht University)

Abstract

Since the middle of the eighteenth century, manufacturing has functioned as the main engine of economic growth and development. However, in recent research, questions have been raised concerning the continued importance of the manufacturing sector for economic development. This paper reexamines the role of manufacturing as a driver of growth in developing countries in the period 1950-2005. The paper makes use of a newly constructed panel dataset of annual value added shares (in current prices) for manufacturing, industry, agriculture and services for the period 1950-2005. Regression analysis is used to analyse the relationships between sectoral shares and per capita GDP growth for different time periods and different groups of countries. For the total sample, we find a moderate positive impact of manufacturing on growth in line with the engine of growth hypothesis. Splitting our sample into three subperiods, we only find a direct effect of manufacturing on growth for the middle period 1970-1990. We also find interesting interaction effects of manufacturing with education and income gaps. In a comparison of the subperiods, it seems that since 1990, manufacturing is becoming a more difficult route to growth than before.

Suggested Citation

  • Szirmai, Adam & Verspagen, Bart, 2011. "Manufacturing and Economic Growth in Developing Countries, 1950-2005," MERIT Working Papers 069, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2011069
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    Cited by:

    1. Zoran Aranđelović & Marija Petrović-Ranđelović & Vladislav Marjanović, 2013. "Structural Changes In The Light Of New Industrial Strategy," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 5-6, pages 373-385, August.
    2. Lavopa, Alejandro & Szirmai, Adam, 2012. "Industrialization, employment and poverty," MERIT Working Papers 081, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Haraguchi, Nobuya & Martorano, Bruno & Sanfilippo, Marco, 2019. "What factors drive successful industrialization? Evidence and implications for developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 266-276.
    4. Amat Adarov & Mario Holzner & Luka Sikic, 2016. "Backwardness, Industrialisation and Economic Development in Europe," wiiw Balkan Observatory Working Papers 123, The Vienna Institute for International Economic Studies, wiiw.
    5. KAFANDO, Namalguebzanga, 2014. "L'industrialisation de l'Afrique: l'importance des facteurs structurels et du régime de change
      [The industrialization of Africa: the importance of structural factors and exchange rate regime]
      ," MPRA Paper 68736, University Library of Munich, Germany.
    6. Hamid Sepehrdoust & Saber Zamani, 2017. "The Challenge of Economic Growth and Environmental Protection in Developing Economies," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 865-883, Autumn.
    7. Terheggen, Anne, 2010. "The new kid in the forest: the impact of China's resource demand on Gabon's tropical timber value chain," MPRA Paper 37982, University Library of Munich, Germany.
    8. Szirmai, Adam, 2011. "Manufacturing and Economic Development," WIDER Working Paper Series 075, World Institute for Development Economic Research (UNU-WIDER).
    9. Mitra, Arup., 2013. "Can industry be the key to pro-poor growth? : An exploratory analysis for India," ILO Working Papers 994843463402676, International Labour Organization.
    10. Romano, Livio & Traù, Fabrizio, 2017. "The nature of industrial development and the speed of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 26-37.
    11. Gozgor, Giray, 2018. "Does the structure of employment affect the external imbalances? Theory and evidence," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 77-83.
    12. Grundmann, Rainer & Gries, Thomas, 2015. "Crucial for Modern Sector Development? The Role of Exports and Institutions in Developing Countries," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112962, Verein für Socialpolitik / German Economic Association.
    13. Maciej Grodzicki, 2013. "Productivity Convergence in Manufacturing in the European Union: The Role of Economic Structure," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 5(2).
    14. Coad, Alex & Vezzani, Antonio, 2019. "Three cheers for industry: Is manufacturing linked to R&D, exports, and productivity growth?," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 14-25.
    15. Adwoa A. Nsor-Ambala, 2015. "Foreign Transfers, Manufacturing Growth and the Dutch Disease Revisited," Bristol Economics Discussion Papers 15/663, Department of Economics, University of Bristol, UK.
    16. Terheggen, Anne, 2011. "The tropical timber industry in Gabon: a forward linkages approach to industrialisation," MPRA Paper 37976, University Library of Munich, Germany.
    17. Jovanović, Jelena Šaković & Peković, Sanja & Bošković, Branko, 2019. "The State of Service Related Competences in Montenegro," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2019), Rovinj, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Rovinj, Croatia, 12-14 September 2019, pages 340-348, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    18. Seng Sothan, 2017. "Causality between foreign direct investment and economic growth for Cambodia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1277860-127, January.
    19. Gabriel, Luciano Ferreira & de Santana Ribeiro, Luiz Carlos, 2019. "Economic growth and manufacturing: An analysis using Panel VAR and intersectoral linkages," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 43-61.
    20. Momita, Yasuaki & Matsumoto, Tomoya & Otsuka, Keijiro, 2019. "Has ODA contributed to growth? An assessment of the impact of Japanese ODA," Japan and the World Economy, Elsevier, vol. 49(C), pages 161-175.
    21. Szirmai, Adam, 2012. "Proximate, intermediate and ultimate causality: Theories and experiences of growth and development," MERIT Working Papers 032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    22. repec:ilo:ilowps:484346 is not listed on IDEAS
    23. Mensah, Emmanuel & Owusu, Solomon & Foster-McGregor, Neil & Szirmai, Adam, 2018. "Structural change, productivity growth and labour market turbulence in Africa," MERIT Working Papers 025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    24. Haraguchi, Nobuya & Cheng, Charles Fang Chin & Smeets, Eveline, 2017. "The Importance of Manufacturing in Economic Development: Has This Changed?," World Development, Elsevier, vol. 93(C), pages 293-315.

    More about this item

    Keywords

    Structural Change; Manufacturing; Engine of Growth; Catch-up;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • N64 - Economic History - - Manufacturing and Construction - - - Europe: 1913-

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