Boosting productivity to meet the middle-income challenge

289 Pages·2014·3.564 MB·English

by  OECD

Perspectives on Global
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Perspectives
on Global Development
2014
BOOSTING PRODUCTIVITY TO MEET
THE MIDDLE-INCOME CHALLENGE
ThisworkispublishedundertheresponsibilityoftheSecretary-GeneraloftheOECD.The
opinionsexpressedandargumentsemployedhereindonotnecessarilyreflecttheofficial
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Pleasecitethispublicationas:
OECD(2014),PerspectivesonGlobalDevelopment2014:BoostingProductivitytoMeettheMiddle-Income
Challenge,OECDPublishing.
http://dx.doi.org/10.1787/persp_glob_dev-2014-en
ISBN978-92-64-21060-8(print)
ISBN978-92-64-21061-5(PDF)
Series:PerspectivesonGlobalDevelopment
ISSN2222-4467(print)
ISSN2222-4475(online)
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FOREWORD
Foreword
D
eveloping economies continue to grow faster than more advanced countries. In2010,
non-OECDcountries’ share in world GDP surpassed that of OECDcountries. Since its initiation
in2010, the series of publications Perspectives on Global Development has investigated the
trends in the “shifting wealth” process, following the increasing economic weight of developing
countriesintheworldeconomy.“Shiftingwealth”hasreceivedaparticularboostthroughtheriseof
People’s Republic of China, which has also led to positive spillover effects on other developing
economies that could supply China’s emerging demand for resource-based products and
intermediates.However,assumingthattrendgrowthremainsthesameinthecomingdecades,the
recently accelerated convergence process of developing with developed country incomes is not
sufficient for many countries (including many middle-income countries) to reach OECD average
incomesby2050.
The2014 edition of Perspectives on Global Development therefore investigates whether
convergence will continue. It argues that for sustained convergence developing countries need to
boostcompetitivenessandnarrowtheirsignificantproductivitygapwithadvancedeconomies.The
report identifies ways through which countries can boost productivity and sustain development.
Thesearenotmutuallyexclusivesocountriescanmakeimprovementsindifferentareasatthesame
time, and they are often interlinked. Moreover, some countries have greater opportunities and
possibilitiesthanothersinsomeareasdependingontheirspecificconditionsandcapabilities.
Whether there will continue to be a trend towards convergence between OECD and
non-OECDcountries depends to a large extent on the performance of the BRIICS (Brazil,
theRussianFederation, India, Indonesia, China and South Africa) – given the size and growth
performance of their economies, the size of their populations and the spillover effects their
development may induce on other developing and developed countries. Therefore, the report also
provides a broader overview of their challenges as well as their prospects to sustainably move
beyondthemiddle-incomelevel.Moreover,thereportplacesemphasisontheincreasinglyimportant
roleofservicestofostergrowthandtoboostcompetitiveness.Italsoshowsthepotentialforregional
developmentpoliciesasafurthermeansofenhancingcompetitiveness.
The report examines productivity at the macro level to identify its contribution to overall
economicgrowth,butalsoatamoredetailedlevelforupto18manufacturingand16servicesectors
in40countries.Aspecialfeatureofthereportisthatitalsostudiesproductivity,technicalefficiency
and mark-ups at the firm level for nine countries – the BRIICS plus Columbia, Cameroon and
Senegal.
PERSPECTIVESONGLOBALDEVELOPMENT2014©OECD2014 3

ACKNOWLEDGEMENTS
Acknowledgements
The2014 edition of OECD’s Perspectives on Global Development was prepared by the
OECD Development Centre under the direction of Mario Pezzini, Director of the OECD
Development Centre.The team was led by Margit Molnar, Head of Competitiveness and
StructuralAnalysisUnit,underthesupervisionofCarlDahlman,HeadofGlobalResearch
andThematic Division.The report was drafted by Margit Molnar, Martin Wermelinger,
DerekCarnegie,andEdouardTurkisch.Significantinputsintothechapterswereprovided
byAlexaTiemann,MarthaBaxter,andFloraVever.Significantinputstotheanalyticalwork
were provided by Jingjing Xia, Miklos Farkas and JerryWeng. Statistical assistance was
provided by Vararat Atisophon and administrative support by Myriam Andrieux.
KenKincaid,CharlesPigott,RobertaBenskyandMarthaBaxtereditedthepublicationand
the OECD Development Centre’s publication team, in particular Elizabeth Nash and
GemmaNellies,turnedthedraftintoapublication.
The authors are grateful for insightful comments by the participants in the experts
meeting, in alphabetical order, RudigerAhrend (Head of Unit, OECD), ChristopheDestais
(Deputy Director, CEPII, France), PeterJarrett (Head of Division, OECD), AlexanderKlein
(Senior Development Economist, Deutsche Investitions- und Entwicklungsgesellschaft
mbH), HenkL.M.Kox (Partner, KVL Economic Policy Research, Den Bosch, Netherlands),
SebastianMiroudot(SeniorTradePolicyAnalyst,OECD),FernandaDeNegri(Director,IPEA,
Brazil),JoaquimOliveira-Martins(HeadofDivision,OECD),PatrickSalez(formerEuropean
CommissionOfficer),Prof.CarlosE.Sepulveda(UniversidaddelRosario,Bogota,Colombia),
AlaindeSerres(HeadofDivision,OECD),WangWei(ViceDirector,DevelopmentResearch
Center of the State Council, China), NimrodZalk (Industrial Development Policy and
StrategyAdvisor,DepartmentofTradeandIndustry,SouthAfrica).
Moreover, the report benefitted from helpful comments on later drafts from
SoniaAraujo (Economist, OECD), JorgeArbache (BNDES), JensArnold (Senior Economist,
OECD),LilasDemmou(Economist,OECD),RichardDutu(Economist,OECD),SimonEvenett
(University of St. Gallen and CEPR), Jose Augusto Fernandes (CNI), JoaoCarlosFerraz
(BNDES),PeterGal(Economist,OECD),JensHøj(SeniorEconomist,OECD),AnnaJankowska
(Economist, OECD), VincentKoen (Head of Division, OECD), AlexandreKolev (Senior
Economist, OECD),Yevgeny Kuznetsov (Migration Policy Institute), Sebastian Nieto Parra
(Economist, OECD), Jose Ramon Perea (Economist, OECD), CharlesPigott (former Senior
Economist, OECD), Dirk Pilat (Deputy Director, OECD), AnnalisaPrimi (Senior Economist,
OECD),ArturRadziwill(SeniorEconomist,OECD),JanRieländer(SeniorEconomist,OECD),
Vicente Ruiz (Economist, OECD), Petar Vujanovic (Senior Economist, OECD) and
AndreasWörgötter(HeadofDivision,OECD).
PERSPECTIVESONGLOBALDEVELOPMENT2014©OECD2014 5
ACKNOWLEDGEMENTS
Special thanks go to Fernanda De Negri and Alexandre Messa Peixoto da Silva from
IPEA, Brazil, Prof. CarlosE.Sepulveda and JuanMiguelGallego from the Universidad del
Rosario, Bogota, Colombia for their co-operation in terms of information sharing and
support to run estimation programmes on non-publically available firm-level datasets in
theircountries.
TheDevelopmentCentregratefullyacknowledgesfinancialsupportfromitsmembers
andadditionalcontributionsfromtheGovernmentofSwitzerlandforthisreport.
6 PERSPECTIVESONGLOBALDEVELOPMENT2014©OECD2014
TABLEOFCONTENTS
Table of contents
Acronymsandabbreviations................................................. 14
Editorial................................................................... 17
Executivesummary......................................................... 19
Chapter1.Shiftingwealthandtheproductivitychallengesformiddle-income
countries .............................................................. 23
Shiftingglobaleconomiclandscape ....................................... 24
Thechallengeofproductivityforconvergence .............................. 31
Fadingoftraditionaldriversofgrowthinsomemiddle-incomecountries....... 36
Boostingproductivityfordevelopment..................................... 45
Notes.................................................................. 49
References ............................................................. 50
Annex1.A1.Methodologicalnotes ......................................... 52
Annex1.A2.Additionaltables ............................................. 55
Chapter2.Competitivenessinacatching-upcontext ............................ 57
Largeproductivitygapsandrelativespecialisationinlowvalue-addedsectors .. 59
Needfordiversificationintohighervalue-addedsectors...................... 63
Strengtheningproduct,labourandfinancialmarketinstitutionsandpublic
governance............................................................. 70
Closercoherencebetweeneducationandtechnologypolicies................. 76
Offeringequalopportunitiesandstabilisingthemiddleclass ................. 85
Developingeffectivegovernmentsandimplementingcriticalreforms.......... 91
Notes.................................................................. 97
References ............................................................. 97
Annex2.A1.Methodologicalnotes ......................................... 102
Chapter3.Improvingcompetitivenessinmanufacturingindustries............... 105
Convergingthroughmanufacturing ....................................... 108
Fosteringacompetitivebusinessenvironment.............................. 114
Encouragingthedevelopmentofcompetitivefirms.......................... 126
Energyefficiencyasafacetofcompetitiveness.............................. 136
References ............................................................. 142
Annex3.A1.Methodologicalnotes ......................................... 144
Annex3.A2.Additionaltables ............................................. 147
PERSPECTIVESONGLOBALDEVELOPMENT2014©OECD2014 7
TABLEOFCONTENTS
Chapter4.Competitivenessinandthroughservices............................. 149
Convergencethroughservices ............................................ 150
Laggingcompetitivenessinservicesectorsofemergingeconomies ............ 163
Buildingcompetitiveness-enhancingenvironmentforservices................ 173
Notes.................................................................. 185
References ............................................................. 186
Annex4.A1.Additionalfigures ............................................ 189
Chapter5.Regionalpoliciestoenhancecompetitiveness......................... 191
DivergingregionalperformanceintheBRIICSandotheremergingeconomies... 194
Factorsthatgiveregionsacompetitiveedge................................ 196
Activatingregions’competitiveedges...................................... 202
References ............................................................. 215
Annex5.A1.Additionaltablesandfigures................................... 217
Chapter6.DevelopmentchallengesoftheBRIICS ............................... 221
DifferingdriversofgrowthacrosstheBRIICS................................ 223
ThechallengesofinternationalintegrationintheBRIICS..................... 231
Brazil.................................................................. 238
RussianFederation...................................................... 244
India .................................................................. 250
Indonesia.............................................................. 256
China ................................................................. 262
SouthAfrica............................................................ 268
Notes.................................................................. 276
References ............................................................. 277
Annex6.A1.Methodologicalnotes ......................................... 280
Annex6.A2.Additionaltablesandfigures................................... 281
Tables
1.1. Sectoraltransformationisdramaticinsomeeconomies ................. 39
1.2. Labourforceparticipationandunemploymentinselectedcountries....... 43
1.A2.1. Shift-shareanalysisoflabourproductivitygrowthperperson,2000-09..... 55
1.A2.2. Within-industryeffectsbyindustry2000-09 ............................ 55
2.1. Thequalityofeducationremainsrelativelylowinmanyemergingeconomies 77
2.2. Chinaistappingglobalknowledgethroughdifferentchannels............ 79
2.3. Innovationindexespartiallyreflectrecentproductionupgrades........... 83
3.A2.1. Labourproductivitygrowthrates,byindustry........................... 147
3.A2.2. Totalfactorproductivity(TFP)growthrates,byindustry.................. 147
3.A2.3. Mark-upestimates,byindustry....................................... 147
3.A2.4. Technicalefficiencyinmanufacturing,2007 ............................ 147
5.A1.1. Manufacturingtechnicalefficiency,byregion–China.................... 217
5.A1.2. Manufacturingtechnicalefficiency,byregion–Colombia................. 217
5.A1.3. Manufacturingtechnicalefficiency,byregion–India .................... 217
5.A1.4. Manufacturingtechnicalefficiency,byregion–Indonesia ................ 217
5.A1.5. Sectorsthatcontributemosttoregionaloutputgrowth–Cameroon ....... 218
5.A1.6. Sectorsthatcontributemosttoregionaloutputgrowth–China........... 218
5.A1.7. Sectorsthatcontributemosttoregionaloutputgrowth–Colombia........ 218
8 PERSPECTIVESONGLOBALDEVELOPMENT2014©OECD2014