1. The Structure of Structural Change and Growth
Erol Taymaz
Yılmaz Kılıçaslan
Department of Economics
Middle East Technical University
Ankara Turkey
IKD Seminar
26 April 2007

2. Outline Questions Structure of production Structure of trade
Structural convergence
Conclusions

3. Questions
In so far as the industrialisation remains an engine of development, structural change and technological growth and modernization, growing manufactured exports are a sign that this engine is working (Lall, 2000: 338).

4. Questions Structure of industry, structural change and growth
Some industries are technologically more dynamic
Generate more innovations
Diffuse innovations throughout the economy
Some industries grow faster
Some industries are more productive

5. Questions Structural change facilitates growth
More innovative/dynamic structure
Average productivity: If the share of more productive industries increases, the average productivity increases.

6. Questions Convergence ?
Less-developed countries are expected to grow faster
by increasing capital intensity, and
by adopting (transferring) technologies generated by developed countries
What about the structure of the industry? Any convergence in structure?

7. Questions
Is there any relationship between structure, structural change and growth?
What is the contribution of structural change to productivity growth?

8. Data
UNIDO Industrial Statistics and Industrial Supply and Demand (Trade) Databases
40+ countries
Production: period, 3-digit industries
Trade: period, 3-digit industries

9. Structural change and productivity
Labor productivity at the manufacturing industry level

10. Structural change and productivity
Within and between components of labor productivity growth

11. Structural change and productivity
Contribution of structural change in the period
High income countries: almost no effect
Low income countries: very small effect
Fast growing countries: not very high, but varies between countries:
Korea: almost no effect
Ireland: not negligible (27 % in , 16 % in )
Turkey: negative after 1980!
Within-industry productivity growth dominates between-industry productivity growth

12. Structure of production
3-sector classification
High tech, medium tech, low tech (OECD)
Classification of countries
Low-income, mid-income, high-income (World Bank)
Growth performance (fast growing countries, Indonesia, Ireland, Korea, Malaysia, Malta, Philippines, Singapore and Turkey)
Average value added shares for 5-year periods
, , ,
, , ,

13. Structure of productionMT
Ethiopia
India
Kenya
Pakistan
Tanzania
Zimbabwe HT LT

14. Structure of production

15. Structure of production

16. Structure of production

17. Structure of production

18. Structure of production

19. Structure of production
There is a strong relationship between structure and growth:
HT and MT sectors have a larger share in developed countries
Developing countries move towards MT industries
Fast growing countries achieve the fastest structural change and move towards HT industries

20. Structure of exports

21. Structure of imports

22. Structure of exports

23. Structure of imports

24. Structure of exports

25. Structure of imports

26. Structural convergence
Any convergence in industrial structure?
Do the structures of industry in developed and developing countries get “similar”?
Apply factor analysis to identify “ideal-typical” structures
5-year averages

27. Structural convergence

28. Structural convergence
Three groups of countries
Club 1: Industrialized countries
Club 2: Less industrialized countries
Club 3: Transition club
All clubs change their structures but there is no structural convergence.
Some countries switch from one club to another over time.

29. Club 1

30. Club 2

31. Club 3

32. Industrial structure, 1965-69

33. Industrial structure, 1995-99

34. Export structure,

35. Export structure,

36. Conclusions
Strong correlation between industrial structure and performance
Strong correlation between the speed and direction of structural change and industrial performance

37. Conclusions
Industry structure changes in both developed and developing countries
There is no structural convergence
Trade structure is more specialized
Developing country structure is more specialized
Persistence in international division of labor

38. Thanks….