No full-text available
To read the full-text of this research,
you can request a copy directly from the author.
Structural Transformation in Asia and the Pacific
Abstract
Many countries in Asia and the Pacific have experienced rapid economic growth and structural transformation in recent decades. Yet, some countries are still at an early stage of this structural transformation and face external conditions less favorable than those faced by the first movers when they were at a similar early stage in their transformation. The external environment is less auspicious, with trade tensions and “friend-shoring” leading to possible deglobalization, while demographic headwinds could also lower sustainable growth rates and induce technological changes, such as the increased use of robots, that reduce the possibility of relying upon labor-intensive development strategies.
ResearchGate has not been able to resolve any citations for this publication.
Over the past few decades, special economic zones (SEZs) have become a widely used industrial policy tool to support structural transformation and economic development. Yet their impact on the economy remains inconclusive, especially in developing countries where the lack of data presents a challenge. This study examines the potentially causal effect of SEZs on the economy of the Lao People’s Democratic Republic using harmonized nightlight satellite data as a proxy for annual economic activity in 148 districts from 1992 to 2021. Using counterfactual estimators for causal inference with time-series, cross-sectional data, SEZ establishment appears to result in a statistically significant increase in the economic activity of the host districts. Heterogeneity tests show that (i) SEZs in the Lao People’s Democratic Republic seem to have had a greater impact on economic activity after 2010, coinciding with the establishment of dedicated SEZ agencies; and (ii) industrial zones appear to have a higher impact than tourism zones.
Global value chains (GVCs) have been a vehicle for job creation in developing Asia, but technology can also displace workers through automation or reshoring of production. We use an input–output approach to examine how employment responded to consumption, trade, and technological progress in 16 economies that accounted for about 95% of employment in developing Asia from 2008 to 2018. Structural decomposition analysis based on the Asian Development Bank’s Multiregional Input–Output database combined with harmonized cross-economy occupation by industry data indicates that, other things being equal, technological change within GVCs and task relocation relate to a decline of routine manual, relative to nonroutine cognitive, occupations in manufacturing. We find no evidence of major shifts in labor demand due to reshoring. Domestic consumption expenditure of goods and services is associated with an increase in labor demand that is large enough to offset efficiency changes in GVCs.
One of the defining features of China’s economy over the two decades between 1995 and 2015 was the persistent rise of wages for workers and professionals in nearly every segment of the economy—with wage rates for labor-intensive jobs in manufacturing, construction, and the informal service sector rising the fastest. Recently, however, the economic environment in China has begun to change, including changes in both employment and wages. We identify recent employment/wage trends throughout China’s economy and postulate the sources of these trends as well as possible future consequences if they continue. We use official, nationally aggregated data to examine employment and wages in multiple sectors and industries. Our findings indicate that China may have entered a new phase of economic development in the mid-2010s. According to the data, in recent years, wage growth has begun to polarize: Rising for professionals employed in formal skill-intensive industries; and falling for workers in the informal labor-intensive service sector. We attribute this increase in skill-intensive wages to an increase in demand for skill-intensive employment, due to the emergence of a large middle class in China, for whom the demand for high technology, finance, banking, health, and higher education industries is increasing while, at least in the recent short term, the supply of experienced, high-skilled professionals has not kept up. The employment/wage trend in the informal (low-wage) service sector, however, is following a different pattern. While there is a rising demand for services in China’s economy, the growth, due to a number of factors (e.g., large shares of GDP targeted by policymakers to investment; high rates of savings by consumers), is relatively slow. In contrast, due to a number of economic forces, including globalization and automation, the supply of labor into the service sector of the informal economy is being fueled by the flow of labor out of manufacturing and construction (two industries that that have experienced employment declines since 2013). These supply and demand trends, in turn, are leading to the fall in the growth rate of wages in the informal service sector. We conclude by discussing the possible longer-term consequences of these emerging polarization trends based on an examination of recent experience with wage polarization occurring in both middle- and high-income countries, as well as its consequences. We also present policy recommendations for greater investment in education and human capital, as well as for the development of a more comprehensive set of social safety nets for different segments of China’s population.
This paper uses labor force survey data from India for 2000 and 2012 to examine how wages behave over the course of structural transformation. We find that wage employment between 2000 and 2012 displays the patterns one would expect for an economy undergoing structural transformation, with employment shares shifting from agriculture to industry and services, and from rural to urban areas and larger cities within urban areas. These shifts, as well as a shift to nonroutine occupations and routine manual occupations outside of agriculture, are associated with an improvement in average wages. Finally, simple Mincerian wage regressions confirm that jobs in larger firms and big cities are associated with significantly higher wages—even more so for women. Overall, our results are consistent with the notion that policies that encourage the expansion of the formal sector and employment in larger firms are crucial for development.
Developing countries have greatly benefited from globalization, coinciding with economic growth and structural transformation. The standard trade theory postulates that trade openness contributes to poverty alleviation directly by changing factor proportions of production and indirectly through the trickle-down effect of growth. Existing multicountry studies using the trade-to-gross-domestic-product ratio to measure openness often fail to find a direct effect of openness on poverty over and above the growth–poverty nexus. This paper is motivated by the concern that the failure of these studies to detect the effectiveness of the factor proportion channel may be due to limitations of the commonly used measure of trade openness: the trade-to-gross-domestic-product ratio. Using a newly constructed index of trade openness, which I dub “the price convergence index,” I find a significant direct effect of openness on poverty reduction. The results also suggest that the impact of growth on poverty is greater for economies with more open trade regimes.
This study investigates the relationship between minimum wage policies and educational choices, specifically the decision between vocational and general school enrollment. While higher minimum wages often attract students to vocational education as a faster route to employment, our analysis of Indonesia Family Life Survey data finds little evidence of increased enrollment in vocational education. This suggests that hikes in the minimum wage are unlikely to divert students away from general education. Our findings reveal notable heterogeneity, showing that an increase in the minimum wage is associated with a statistically significant reduction in the likelihood of men and individuals in rural areas to opt for vocational education. These findings underscore the critical need for Indonesia to revitalize its vocational education system, striking a balance between general and vocational pathways to equip its workforce with the skills required for a rapidly changing environment.
This study delves into the trade dynamics of Southeast Asian countries in response to the trade dispute between the United States (US) and the People’s Republic of China (PRC). Our analysis uncovers diverse patterns of trade diversion effects among eight Southeast Asian countries, revealing significant disparities in their reactions to this trade dispute. Specifically, we observe Viet Nam’s substantial export growth to both the US and the PRC, influenced by geopolitical uncertainties and strategic relocations. Thailand, on the other hand, experiences positive effects on its exports to the US, potentially due to trade diversion, alongside diminishing exports to the PRC. Moreover, we find sector-specific trends, such as an upsurge in machinery exports from Viet Nam, Thailand, and Indonesia. In contrast, Brunei Darussalam, Indonesia, Malaysia, Myanmar, the Philippines, and Singapore largely sustained their respective export levels to the US. Our findings highlight the importance of tailored trade policies that consider each Southeast Asian country’s unique industrial structure and degree of global value chain integration.
This paper provides estimates of the impact of demographic change on labor productivity growth, relying on annual data during 1961-2018 for a panel of 90 advanced and emerging economies. We find that increases in both the young and old population shares have significantly negative effects on labor productivity growth, working via various channels-including physical and human capital accumulation. Splitting the analysis for advanced and emerging economies shows that population aging has a greater effect on emerging economies than on advanced economies. Extending the benchmark model to include a proxy for the robotization of production, we find evidence indicating that automation reduces the negative effects of unfavorable demographic change-in particular, population aging-on labor productivity growth.
Popular DMSP night lights data are flawed by blurring, top-coding, and lack of calibration. Yet newer and better VIIRS data are rarely used in economics. We compare these two data sources for predicting GDP, especially at the second subnational level, for Indonesia, China and South Africa. The DMSP data are a poor proxy for GDP outside of cities. The gap in predictive performance between DMSP data and VIIRS data is especially apparent at lower levels of the spatial hierarchy, such as for counties, and for lower density areas. The city lights-GDP relationship is twice as noisy with DMSP data than with VIIRS data. Spatial inequality is considerably understated with DMSP data, especially for the urban sector and in higher density areas. A Pareto adjustment to correct for top-coding in DMSP data has a modest effect but still understates spatial inequality and misses key features of economic activity in big cities.
In this paper, we consider the sources and prospects for economic growth in China with a focus on human capital. First, we provide an overview of the role that labor has played in China's economic success. We then describe China's hukou policy, which divides China's labor force into two distinct segments, one composed of rural workers and the other of urban workers. For the rural labor force, we focus on the challenges of raising human capital by both increasing basic educational attainment rates as well as the quality of education. For the urban labor force, we focus on the issues of further expanding enrollment in college education as well as improving the quality of college education. We use a regression model to show the typical relationship between human capital and output in economies around the world and demonstrate how that relationship has evolved since 1980. We show that China has made substantial strides both in the education level of its population and in the way that education is being rewarded in its labor markets. However, as we look ahead, our results imply that China may find it impossible to maintain what appears to be its desired growth rate of 7 percent in the next 20 years; a growth rate of 3 percent over the next two decades seems more plausible. Finally, we present policy recommendations, which are rooted in the belief that China continues to have substantial room to improve the human capital of its labor force.