Sectoral Productivity Shock, Regional Differences in Intersectoral Linkages, andStructural Transformation in Ghana

This paper studies the effect of a local sectoral productivity shock on subnational structuraltransformation. The analysis is based on regional input-output tables constructed for 2004 and 2013 andavailable censuses of firms in 2003 and 2013 for Ghana. Based on the data, the analysis confirms the occurrence of amining productivity shock. Between 2004 and 2013, mining grew dramatically as a share of gross domestic product. Themining shock occurred primarily in the south of Ghana with much larger increases in mining’s share in regional output,the number of mining firms, and mining employment than in the north of the country. The findings show that the miningproductivity shock led to growing regional (north-south) differences in intersectoral linkages, with greaterintermediate use of mining output and a larger sectoral total factor productivity ratio between mining andmanufacturing in the south than in the north. Informed by international evidence of strong intersectoral linkagesbetween mining and heavy manufacturing industries, the paper examines the performance of heavy manufacturing in responseto the mining productivity shock. The elasticity of heavy manufacturing to mining employment growth is 50 percentlarger in the south than in the north, generated by an increase in both average firm employment and the entry ofnew firms. These north-south differences are interpreted as possibly due to weak interregional production linkages.