technology, structural change and growth eclac summer school august 2013
TRANSCRIPT
Technology, structural change and growth
ECLAC Summer SchoolAugust 2013
Objectives of the paper
• To present basic insights on structural change and growth into a simple framework
• To show some empirical evidence and stylized facts that are consistent with the “structural change” story
• The starting point: the international diffusion of technology is slow and asymmetric (North-South technology gap)
• Technology diffuses only partially to the South and is highly localized in few activities
• A Schumpeterian flavor: technical change and innovation as the driving force of development.
Starting point
Impacts on:
a) heterogeneity b) specialization c) growth
A graphic representation: heterogeneity
Figura 1. Productividad del trabajo y estructura productiva del centro y la periferia
Productividad del Trabajo y Estructura
Variables
= Productividad del trabajo E = Participación acumulada en el empleo , 0 E 1 N= Número de sectores de la economía ordenados de forma decreciente según la productividad, N= 1 máxima productividad, N = NC e N=NP mínima productividad en centro y periferia, respectivamente NC = Total de sectores en el centro NP = Total de sectores en la periferia, NP < NC (mayor diversificación de la estructura del centro). En el punto (NP, EP) del gráfico C hay una discontinuidad, cesa la acumulación de empleo en el sector moderno de la periferia. EP = Total del empleo en el sector moderno de la periferia (el empleo residual 1-Es se aloja en el sector de subsistencia con productividad igual a *) = Productividad del trabajo del sector de subsistencia de la periferia P = Productividad del trabajo del sector NP en la periferia _____________________________________________
NC
NP
E=0
B Empleo en el Centro
C Empleo en la periferia
E = 1
E=0
N=1 N=1
1-Ep
Ep
NC
Discontinuidad del sector moderno
NC
NP
A Productividad en el centro
D Productividad en la perfiferia
NC
N=1
N=1
P
C
a) Heterogeneity
• Large differences in labor productivity emerge within and between sectors
• Graphic: two structures that differ in terms of number of sectors, technological intensity (complexity) and variance of labor productivity
How specialization emerges: N is an index of technological complexity
N1 N
Porductividad relativa S/N
W/W*e
Porductividad relativa S/N Salarios relativos S/N
b) Specialization
• Ranking sectors according with South-North relative productivity p
• Unitary costs depends on the productivity gap and relative wage
• The productivity gap is higher in sectors which are more technologically-intensive (comparative advantage of the South is lower in high-tech sectors)
• Given the wage ratio, the South specializes in sectors with lower technological intensity
Dynamics of relative productivity
• Relative South-North productivity:• p = p S / p N
• it increases with relative growth and falls with the technological intensity of the goods: a, b and a are technological parameters
CP yybNa
Relative wages
• In our examples relative wages will be considered constant, but they can easily be made a function of the diversification of the productive structure or of the relative rate of growth in South and North
c) Growth (Keynesian side)
-> The pattern of specialization implies lower dynamism of world and domestic demand for Southern goods
-> a less articulated productive structure gives rise to losses of effective demand and a strong propensity to import that reduces the momentum of growth and leads to BOP and exchange rate crisis
Falling behind
• Growth will be constrained by external disequilibrium
• BOP constraint: yS/yN= e=eX/eM
• Elasticity ratio depends on N: e = hN• Falling behind: Low income elasticity of the
demand for exports and high income elasticity of the demand for imports, yS < yN
From specialization to growth
A e/
N N1
Brief notes on evolutionary microdynamics
• Why technical change does not diffuse uniformly across countries and within sectors?
• Which policies close the technology gap and which policies lead to divergence?
• Conventional micro usually avoids these questions; on the other hand, they are at the core of evolutionary micro
Evolutionary perspective on technical change 1
• It has a critical tacit component that could not be obtained from importing capital goods nor from reading manual and other forms of codified information;
• Cumulativeness: firms that are closer to the technological frontier have an advantage in innovation and will tend to increase their distance with respect to the laggards (cumulative processes leading to virtuous or vicious cycles)
Evolutionary perspective on technical change 2
• It is subject to path-dependency, i.e. the evolution of capabilities depends on previous experience and directions of past learning
• There exists complementary between sectors and capabilities, in such a way that externalities and increasing returns are crucial at both the industrial and economy levels
• There is irreversibility in the building of certain (physical and technological) assets, which cannot be just abandoned or replaced
Convergence and divergence
• There is no reason for naïve optimism about convergence. Path-dependency and cumulativeness lead to strong inertia in the patterns of learning and specialization.
• On the other hand, catching up may be possible under specific circumstances, when industrial policies and institution-building create a favorable environment for learning from imported technology.
Industrial and technological policy
• Market forces tend to endogenously reinforce asymmetries; active policies are required to enhance diffusion
• Focus on institutions, complementarities and increasing returns rather than on flexibility in the goods, financial and labor markets.
The other supply side
• For having this virtuous cycle there must be in place an articulated institutional framework in which firms and non-profit organisations (particularly those directly related to education and R&D) are nested in a network of technological and productive flows which enhances the problem-solving capabilities of producers and stimulates the various forms of interactive learning – what has been called the National System of Innovation, NSI (Nelson, Freeman, Lundvall, Metcalf).
Macrodynamics
• The technology gap shapes relative productivities (box A)
• This in combination with relative wages define the pattern of specialization (boxes A and D)
• Specialization defines the BOP-constrained rate of relative growth (B)
• Growth defines labor demand and the absorption of informality and subsistence workers (E)
The complete system
Figura 2. Especialización, salarios y crecimiento en el sistema Centro-Periferia
P/C
P/c
W*
A
B C
D
NZ N
P/c
yP/yC
yP/yC
45º
W = WP/eWC
Absorción
F Crecimiento del producto
Aumento de la productividad más aumento de la oferta de trabajadores
N
Equations of the model (Cimoli and Porcile, 2013, CJE)
Box 1: The 5-equation LAS System
System 1, cNN * System 2, cNN *
(2) CP yybNa
(3) C
P
y
y
(5) hN (7) WW
(10) WN *
(2) CP yybNa
(3) C
P
y
y
(5) hN (8) )(NWW
(11) *)(* NWN
Equilibrium
System 1, cNN * System 2, cNN *
(12) WW
(13) hb
WaN
*
(14)
hb
Wah
y
y
C
P
*
(15) WN *
(16) )(NWW
(17) hb
NWaN
*)(
*
(18)
hb
NWah
y
y
C
P
*)(
*
(19) ** NWN
Shocks and policies
• Industrial and technological policy• Vent for surplus versus Dutch disease• Unilateral trade liberalization
Case 1: Technological policy
P/C
P/c
W
3A
3B 3C
3D
N1 N
P/c
yP/yC
yP/yC
45º
Z
X
X X
Z X
Z
X
N2
W
Technological policy
• An active technological policy reduces the technology gap enhancing diversification towards sectors with higher technological-intensity and higher demand growth
Impact of I&T Policy
Graph 1A. Country A before the adoption of an active industrial and technological policy
Graph 1B. Country A after the adoption of an active industrial and technological policy
Structural change and specializationAMÉRICA LATINA Y ASIA: PATRÓN DE CAMBIO ESTRUCTURAL Y PARTICIPACIÓN EN LAS EXPORTACIONES, 1985-2011
Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de United Nations Commodity Trade Statistics Database (COMTRADE).
Co-evolution, structural change and labor productivity1970-2008
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.450
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1970
2008
1970
2008
ArgentinaKorea, Republic of
relative labor productivity
IRP
Co-evolution between KE and SE
Sector PB RRNN BT MT AT Otros Media
Argentina 0.70 1.05 0.95 1.72 1.48 0.90 1.13
Brasil 0.75 1.41 1.26 1.91 2.15 1.54 1.50
México 1.30 1.22 1.54 2.27 2.03 1.31 1.61
Media 0.92 1.23 1.25 1.97 1.89 1.25 1.41
Elasticities: South America
Elasticities: Korea
Production structure: an international comparison
Indicadores de cambio estructural y esfuerzo tecnológico, varios años
Productividad
relativa IA
1985 IA 2007 X_HMT/X EXPY IPR Pat. I+D
Argentina 25.7% 0.1 0.2 22.0% 10.4 0.4 1.0 0.5%
Brasil 11.7% 0.4 0.9 32.0% 11.4 0.7 0.5 1.0%
México 19.8% 0.3 1.1 60.5% 13.2 0.6 0.6 0.4%
Asia en desarrollo 33.8% 0.5 2.3 64.3% 14.6 0.9 17.2 1.3%
América del Sur 12.1% 0.3 0.6 18.5% 9.1 0.2 0.4 0.4%
América Central 11.0% 0.2 1.1 34.2% 11.2 0.2 0.3 0.2%
Economías maduras intensivas en recursos naturales (EM-RRNN)
71.3% 0.5 1.3 32.4% 14.1 0.8 55.2 2.0%
Economías maduras 76.3% 0.8 1.5 64.6% 15.0 1.1 126.1 2.4%
A sample of countries
Participación relativa de
las ingenierías (IPR) Productividad
relativa EXPY
Argentina 0,40 0,26 10,4
Brasil 0,64 0,12 11,2
Chile 0,17 0,20 8,9
Colombia 0,24 s.d. 9,9
México 0,64 0,20 12,5
Uruguay 0,18 s.d. 10,4
Australia 0,67 0,59 12,3
Dinamarca 0,87 0,78 14,0
Finlandia 0,94 0,73 15,0
Noruega 0,76 1,01 10,8
República de Corea
1,07 0,38 14,8
Gini in productivity and income
Inequality and the production structure
Production structure and education
Two tales in the linear model: technological intensity of the production structure
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
RSE, Argentina
RSE Korea
IPR
EXPY19
6219
6319
6419
6519
6619
6719
6819
6919
7019
7119
7219
7319
7419
7519
7619
7719
7819
7919
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
5,000
7,000
9,000
11,000
13,000
15,000
17,000
Argentina Korea
year
EXPY
Case 2: Dutch disease
P/C
P/c
1W
1
A
B C
D
N1 N
P/c
yP/yC
yP/yC
45º
W = WP/WC
X
Z1
N2
Z2
X X
2W
Z2 X
Y
Z1
Z2 X
Case 2: Dutch disease
• A positive shock in commodity prices leads initially to higher growth, more learning and investment (vet for surplus)
• If the real exchange rate rises, then there will be less diversification and slower growth at the end of the adjustment (regressive structural change)
• A key point is the policy reaction to the shock and how to neutralize appreciation
Case 3: unilateral trade liberalization
P/C
P/c
A
B C
D
N1 N
P/c
yP/yC
yP/yC
45º
W = WP/WC
Z
Z
N2
X X
X
Z X
N1 N2
F
X X
x
z
W
Case 3: unilateral trade liberalization
• Reduces diversification• Increases heterogeneity• Rising productivity levels in commodities,
falling in industry• Of course trade liberalization plus industrial
policy may significantly change the outcomes