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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 2011-069, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2011069
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    More about this item

    Keywords

    Structural Change; Manufacturing; Engine of Growth; Catch-up;
    All these keywords.

    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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