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Statistics and National Development Implications of New Structural Economics


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Title: Statistics and National Development Implications of New Structural Economics

Statistics and National DevelopmentImplications
of New Structural Economics
International Forum on Monitoring National
Development Issues and Challenges Volker
Treichel Lead Economist, Operations and Strategy,
Office of the Senior Vice-President and Chief
  • September 27, 2011

Where has development economics brought us? Is it
serving us well? (President Robert Zoellick,
October 2010)
  • The world is a riskier place than we previously
  • New economic powers are emerging to create a
    multi-polar world
  • But not everyone has benefited, and we can no
    longer assume that there is a single model for
  • This is a time for new paradigms and new
  • New paradigms and approaches have implications
    for data

Why do we need to rethink development
Economic Crisis and Crisis in Economics
How has economic development theory evolved?
Successful East Asian Tigers Export Promotion
China, Vietnam and Mauritius Dual-track approach
to transition
Fast, Sustained growth is a recent phenomenon
  • The fast and sustained income growth in
    industrialized countries is a result of
    continuous technological innovation as well as
    structural change

Major features of Structural Change
  • Kuznets identified four features of modern
    economic growth
  • There is a change in the sectoral composition of
    the economy as the share of the non-agricultural
    sectors increases and that of the agricultural
    sector decreases.
  • This sectoral shift is mirrored in the pattern of
    employment. i.e. the proportion of the labor
    force employed in the non-agricultural sectors
    rises, while that in the agricultural decreases.
  • There is redistribution of the population between
    the rural and urban areas.
  • There is an increase in the relative size of the
    capital-labor ratio.
  • Major conclusion Some structural change,
    not only in economic but also in social
    institutions and beliefs, are required without
    which economic growth would be impossible.
    (Kuznets, 1971).

The Power of Structural Change
  • Labor productivity gaps between different sectors
    are typically very large
  • If Malawi, labor productivity in mining is 136
    times larger than that in agriculture.
  • If all of Malawis workers could be employed in
    mining, Malawis labor productivity would match
    that of the United States.
  • In the process of growth, labor and other
    resources move from less productive to more
    productive sectors.
  • We need to ensure that labor moves to more
    productive activities otherwise structural
    change will reduce growth.

Where DO WE STAND in development EconomiCs
New Framework for Research at the World Bank
  • Transformation stimulating structural
  • Opportunities broadening opportunities
  • Risks increasing risks and vulnerability
  • Results focusing on results in policies and aid

Growth and Transformation Understanding
Structural Change
  • Understanding the relationship between structural
    change and broader development goals, including
    poverty reduction
  • Role of states, markets and the private sector in
    promoting structural transformation and
    upgrading. Related governance issues.
  • Appropriate policies at each stage of economic
  • Governance issues for industrial upgrading and
    structural change
  • Role of agriculture versus other sectors,
    sectoral priorities and trade-offs
  • An example of policy problems in this area
    highlights the statistical and data challenges

The Process of Economic Integration (Imbs and
  • Sectoral diversification in early stages of
    development is accompanied by geographic
  • Sectoral concentration in later stages of
    development accompanied by geographic
  • Reduced range of activities produced across all
    regions. Location of activity does not seem to
    matter. Regions become increasingly similar.
  • How to accelerate this process?

How to bring about structural change Growth
Identification and Facilitation
Aim before you fire
  • The key lesson, from the new structural
    economics, is that for an industrial policy to be
    successful, it should target sectors that conform
    to the economys latent comparative advantage.
  • We see this from the historical experience (e.g.,
    next slide).
  • But how to do it?

Most Industrial Policies failed
  • Most governments in the developing world used
    industrial policies but failed. The reason was
  • Attempt to develop industries that were too far
    advanced compared to their of development and
    went against their comparative advantages
  • The firms were non-viable in competitive markets
    and required government policy supports for their
    initial investment and continuous operations.
    This led to rent-seeking, corruption, and
    political capture.

But sectoral production and input data are scarce
  • Estimating sectoral measured TFP requires data
    on total output, employment, capital stocks, and
    intermediate input usage, all in real terms, by
    sector..The set of countries and sectors for
    which this measured TFP can be computed is not
    large..There are only 12 countries with all the
    required data in at least some sectors
  • --From Levchenko and Zhang, February 2011

Facilitating State and Industrial Policy
  • Industrial policy is a useful tool for the state
    to play the facilitating role
  • Type of coordination will be different,
    depending on industries.
  • The governments resources and capacity are
    limited. The government needs to use them
  • To facilitate formation of clusters and obtain
    agglomeration effects.

From Open Data to Open Development
  • We cannot understand the world without good data
  • As governments and the private sector act on new
    knowledge and pursue new policies, the demand for
    data will grow
  • Building the capacity of national statistical
    systems to respond to these challenges is part of
    the transformation process
  • We have seen many advances in national and
    international statistics over the past decade,
    and we will be there to work with you in the
    decade ahead that is the spirit of Open

A Statistical Framework For Understanding Growth
And Structural Change (page 1)
A Statistical Framework For Understanding Growth
And Structural Change (page 2)
  • Endowments (Stocks) by Sector
  • Natural resource stocks (mineral marine
    forests soil water)
  • Human capital (schooling, skills)
  • Physical capital (machinery, equipment,
  • "Hard" infrastructure (transportation,
    information and communication, water and
  • "Soft" infrastructure (social cohesion,
    inequality, institutional capacity, business
  • Other Inputs by Sector
  • Labor force (employment by industry, skill
    levels, gender)
  • Raw intermediate materials (energy, material
  • Capital services (depreciation)
  • Financial (investment, domestic and international
    credit markets)

A Statistical Framework For Understanding Growth
And Structural Change (page 3)
  • Outputs
  • Output and value added by industrial sector
  • Output and value added by household sector
  • Prices of inputs, outputs needed to calculate
    multifactor productivity (TFP)
  • Exports and imports of goods and services by
  • Policies
  • Taxes and subsidies
  • Interest rates
  • Social and demographic characteristics
  • Population by age and gender
  • Age-specific morbidity and mortality rates
  • School enrollment and completion rates,
    achievement levels
  • Migration rates

Data Needs for Understanding why Transformation
does not happen in Africa
  • Sectoral composition of output and employment in
    urban and rural settings
  • Sectoral data on capital stocks and other inputs,
    enabling productivity calculations
  • Details on output and input (wages) prices
  • Data on infrastructure (roads), irrigation. One
    explanation for the puzzle is that high
    transportation costs make food expensive in
    cities, limiting the size of urban populations.