The Oxford Handbook of Structural Transformation (Oxford Handbooks)

The Oxford Handbook of Structural Transformation addresses the economics of structural transformation around the world. It deals with major themes, which include history and context, critical issues and concepts, methodological foundations, main theoretical approaches, policy issues, some illuminating country experiences of structural transformation, and important debates on the respective roles of the market and the state in that process. The historical record provides a challenge for economists to understand the success of the rising economic powers (some of them initially considered unlikely candidates for prosperity) and the stagnation or decline of others. Five major questions emerge: DT Why has so much divergence occurred among nations of the world since the Industrial Revolution, and particularly during the 20th century? DT Why has the pattern changed recently with the emergence of a few developing economies (e.g. the multi-polar world), and can it be sustained? DT What are the key drivers, strategies, and policies, to foster structural transformation in various different country contexts and in a constantly evolving global economy? DT How could low- and middle-income countries avoid development traps and learn from past experiences whilst exploiting the new opportunities offered by the Fourth Industrial Revolution? DT What is the role of various development stakeholders and other important players in facilitating sustained economic convergence among nations? This book addresses these questions, bringing the rigor, usefulness, and multi-disciplinary scope of the Oxford Handbook series to a critical topic in economics. The Oxford Handbook of Structural Transformation is an essential reference work and a stimulus to new research and creativity across all branches of the social sciences. Cover THE OXFORD HANDBOOK OF STRUCTURALTRANSFORMATION Copyright Contents List of Figures List of Tables List of Contributors Introduction: Structural Transformation—Overcoming the Curse of Destiny Transformations: Narratives of despair The signifying monkeys—What drives structural change Debating structural change processes: How they occur Getting into the black box: Industrialization, Unavoidable, and evolving feature of change Deindustrialization and automation: Threats or opportunities? References PART I: THEORIES AND FRAMEWORKS OF STRUCTURAL CHANGE Chapter 1: Structural Transformation, deep downturns, and government policy 1.1 The failure of markets and politics to manage structural transformations 1.2 Interpretation of the great depression 1.3 Interpretation of the 2008 crisis 1.4 Remarks on industrial policies as cyclical policies 1.5 Concluding remarks Acknowledgements References Chapter 2: Structural transformation and growth: Theoretical Considerations 2.1 Introduction 2.2 Qualitative analysis of driving forces 2.2.1 A Benchmark Model 2.2.2 Income Effects 2.2.3 Relative Price Effects I: Uneven Technical Progress 2.2.4 Relative Price Effects II: Heterogeneous Capital Intensities 2.2.5 Other Formulations 2.3 Structural transformation and balanced growth 2.3.1 Balanced Growth in the One Sector Growth Model 2.3.2 Early Results on Structural Transformation and Balanced Growth 2.3.2.1 Structural Change Via Uniform Technical Progress 2.3.2.2 Structural Change Via Non-Uniform Technical Change 2.3.3 Structural Change and Heterogeneous Capital Intensities 2.4 Discussion and recent progress 2.5 Conclusion Acknowledgements References Chapter 3: Remodelling structural change 3.1 Introduction 3.2 Structureless framework 3.3 Why structures matter for development 3.4 A benchmark model of new structural economics 3.4.1 Model Environment 3.4.2 Market Equilibrium 3.4.3 Dynamics 3.4.3.1 Environment 3.4.3.2 Equilibrium Characterization 3.4.4 Empirical Relevance 3.4.5 Related Literature 3.4.6 Policy Implications 3.5 Extensions of the JLW model 3.5.1 International Trade 3.5.2 Non-Competitive Market Structure 3.5.3 Marshallian Externality and Industrial Policies 3.5.4 Frictional Labour Market 3.5.5 Further Discussions 3.6 Conclusion References Chapter 4: Structural transformation and income distribution: Kuznets and Beyond 4.1 Introduction 4.2 Kuzentsian basics 4.3 Some simple analytics 4.4 Kuznets beyond kuznets 4.5 Conclusion References Chapter 5: The Flying-Geese theory: Reassessed and Reformulated in New Structuralist Perspective 5.1 Introduction: A reassessment 5.1.1 The USA as the Leader 5.1.2 Three Types of FG-style Structural Transformation 5.1.3 The Role of Multinational Corporations as an Instrument of Catch-up—and an Endogenizer of Growth in the World Economy 5.1.4 Friedrich List’s Legacy in the FG Theory 5.1.5 Hegelian Dialectics in Akamatsu’s Analysis 5.2 The '(Double-Helix) ladder of development à la schumpeter'; an analytics for structural transformation 5.2.1 A Historical Progression of Structural Transformation 5.2.2 Intra-industry Side-ladders 5.2.3 A Caveat to Stages Analysis 5.2.3.1 Customized Catch-up Strategies 5.2.3.2 Industrial Fusion and Reconfiguration 5.3 The roles of government and the market in catch-up growth 5.4 The schumpeterian ladder and its S-shaped growth trajectory 5.5 Three rounds of national ecosystem reform in moving sustainable growth forward 5.5.1 The First Round—from Low-income Stagnation towards Middle-income Status 5.5.1.1 ‘Grabbing low-hanging fruits’: Joining in Comparative Advantage Relaying in Low-end Manufacturing—with Magnified Comparative Advantage 5.5.2 The Second Round—Bypassing the Middle-income Trap towards High-income Status 5.5.3 The Third Round: Escaping the ‘High-income (Sclerosis) Trap’ 5.6 Summing up References Chapter 6: Changing income inequality during structural transformation: The role of agricultural prices 6.1 Analytical perspectives and policy approaches since 1950 6.1.1 Structural Transformation, Agricultural Development and Food Security 6.1.2 A Quick Review of the Literature: 1950 to the Present 6.2 Structural transformation as the organizing framework 6.2.1 Structural Transformation in Historical Perspective 6.2.2 Agricultural Productivity and Structural Transformation 6.3 Tensions along the transformation path 6.3.1 Mind the Gap 6.3.2 Widening Rural–Urban Income Gaps 6.3.3 Changes over Time 6.3.3.1 The Short Run 6.3.3.2 Long-run Patterns from 1820 to 1985 6.4 Asian patterns are different 6.5 A macro food policy perspective Appendix I: Core literature on food price instability References Chapter 7: Structural transformation: A Competitiveness-Based View 7.1 Introduction 7.2 Competitiveness and economic development 7.2.1 Defining Competitiveness 7.2.2 Drivers of Competitiveness 7.2.3 Competitiveness and Economic Development 7.2.4 Policies for Competitiveness Upgrading 7.2.4.1 Setting the Right Goal for Policy 7.2.4.2 The Case for Government Policy 7.2.4.3 The Design of Systemic Policies: Strategic Selection and Integration of Policy Actions 7.2.4.4 Implementing Policies for Upgrading Competitiveness 7.3 Competitiveness and structural transformation 7.3.1 Key elements of Structural Transformation 7.3.2 Contrasting the New Structural Economics with the Competitiveness Framework 7.3.2.1 Analytical Categories for Measuring Economic Structure 7.3.2.2 The Relationship between Economic Structure and Prosperity 7.3.2.3 Patterns of Economic Development 7.3.2.4 Implications for Economic Policy 7.4 Conclusion References PART II: DRIVERS, CHANNELS, AND POLICY INSTRUMENTS Chapter 8: Trade and structural change over two centuries 8.1 Introduction 8.2 The growth of world trade, 1800 to the present 8.3 Openness and the two globalization 8.4 Structural transformation and the growth in openness 8.5 Conclusions References Chapter 9: Financial reforms, development, and structural change 9.1 Literature review: Finance and growth rarely meets structural change and reforms 9.2 Data and evaluation methodology 9.3 A First analysis of the data results 9.4 Cecomposing labour productivity growth 9.5 Using a difference-in-difference regression approach 9.6 Credit as a proxy for financial depth 9.7 Conclusions Annex 1: The Main characteristics of the data References Chapter 10: Location fundamentals, agglomeration economies, and the geography of multinational firms 10.1 Introduction 10.2 Related literature 10.3 Quantifying agglomeration: Methodology 10.3.1 The Agglomeration Index 10.3.2 Empirical Procedure 10.3.2.1 Step 1: Kernel Estimator 10.3.2.2 Step 2: Counterfactuals and Global Confidence Bands 10.3.2.3 Step 3: Agglomeration Index 10.4 Measuring location fundamentals and agglomeration economies 10.4.1 MP Location Fundamentals 10.4.1.1 Step 1 10.4.1.2 Step 2 10.4.2 Agglomeration Economies 10.4.2.1 Vertical Production Linkages 10.4.2.2 Externality in Labour Markets 10.4.2.3 Externality in Capital-good Markets 10.4.2.4 Technology Diffusion 10.5 Data: The worldbase database 10.5.1 MNC Establishment Data 10.5.2 Domestic Plant Data 10.6 Assessing the roles of location fundamentals and agglomeration economies 10.6.1 MNC Offshore Agglomeration 10.6.2 MNC Headquarters Agglomeration 10.6.3 Comparing the Agglomeration of MNC Offshore and Domestic Plants 10.7 Aditional econometric analysis 10.8 Conclusion Appendix 1 Acknowledgements References Chapter 11: Sustainable structural change in the context of global value chains 11.1 Introduction 11.2 Analysis of structural transformation through exports: Diversification and sophistication 11.2.1 Export Diversification 11.2.2 Export Sophistication 11.2.2.1 Characteristics of Exporting Countries for Measuring Sophistication 11.2.2.2 Characteristics of Countries and Products for Measuring Sophistication 11.3 The approach through exports and global value chains 11.4 Conclusion: The sustainability of the process of structural transformation References Chapter 12: Participation in global value chains: Challenges and opportunities 12.1 Introduction 12.2 Global value chains (Re)shape geography and transform the global economy 12.3 Risks and opportunities of participation in GVCs for firms and people 12.4 Special challenges for less developed countries 12.4.1 Positions and Nature of Value Chains 12.4.2 Size of Firms and Economies 12.5 Ploicy discussions Acknowledgements References Chapter 13: Building effective clusters and industrial parks 13.1 Introduction 13.2 Building industrial clusters 13.2.1 0→1 13.2.2 1→N 13.2.3 N→Q 13.3 The case of a hometown-based clusters: Combine service cluster in jiangsu, china 13.3.1 0→1 13.3.2 1→N 13.3.3 N→Q 13.4 Building industrial parks 13.4.1 Targeting International Firms 13.4.2 Targeting Grouped Businesses 13.4.3 Incentivizing First Movers 13.4.4 Step-by-Step Approach 13.4.5 Industrial Park Failures 13.5 General remarks Appendix A: The origin of the wenzhou footwear cluster Appendix B: Building a logistics center in the puyuan cashmere cluster Acknowledgements References Chapter 14: Infrastructure finance: Mobilizing Long-Term Liability Embedded Funds from International Institutional Investors to Emerging Markets 14.1 Introduction 14.1.1 The Infrastructure Funding Gap 14.1.2 Responding to the Challenge 14.2 Current climate of global infrastructure funding and finance 14.2.1 Conditions of the Global Financial Market 14.2.2 Implications of the Global Market Trend 14.3 Changes in regulation and accounting standards 14.3.1 IFRS 4 Phase II (IFRS17) 14.3.1.1 Impact ofIFRS4 Phase II 14.3.2 IPSAS 32 14.3.2.1 Impact of IPSAS 32 14.3.3 Solvency II 14.3.3.1 Impact of Solvency II 14.3.4 BASEL III 14.3.4.1 Impact of BASEL III 14.3.5 Implications of Changes of Regulation and Accounting Standards 14.4 Targets for EMDE infra finance 14.4.1 Target Institutions 14.4.2 Target Countries 14.4.3 Promoting Infrastructure Projects as an Asset Class 14.4.3.1 Asset Allocation and Asset Class Concepts in Portfolio Management 14.4.3.2 Increasing the Attractiveness of Infrastructure as an ‘Asset Class’ 14.4.3.3 Infrastructure Investment in a New Environment of Liability-Driven Investment 14.4.4 Facilitating the Emergence of the Infrastructure Asset Class 14.4.4.1 Drawing on Past Experience in Product Initiation 14.5 Proposal for innovative financial products 14.5.1 Product Proposal #1: Asset-backed Security for PPP 14.5.1.1 Profile of Target Projects and Private Financing Institutions and Expected Benefits 14.5.2 Product Proposal #2: Infrastructure CLO Product (I-CLO) 14.5.2.1 Profile of Target Projects and Private Financing Institutions and Expected Benefits 14.5.3 Product Proposal #3: Project Puttable Bond 14.5.3.1 Profile of Target Projects and Private Financing Institutions and Expected Benefits 14.5.4 Product Proposal #4: MIGA Non-Honouring of Sovereign Financial Obligation Bond 14.5.4.1 Target Projects and Private Financing Institutions 14.5.5 Key Challenges and Areas for Further Development References PART III: EMPIRICS OF STRUCTURAL CHANGE Chapter 15: Measuring structural change 15.1 Introduction 15.1.1 The Steps to Constructing an Index 15.2 Traditional approaches and their shortcomings 15.2.1 To theorize or not to Theorize 15.3 A new approach to measuring structural transformation 15.3.1 Dealing with Missing Data 15.3.2 Composing the index 15.3.2.1 Normalization 15.3.2.2 Aggregation 15.3.3 Insights from New Structural Economics 15.3.4 Computing and Presenting the Reliability of the Index 15.4 Conclusion References Chapter 16: Transforming traditional agriculture redux 16.1 Introduction 16.2 Agriculture in the Broader economy 16.3 The shifting locus of global agricultural production 16.4 Accounting for output growth 16.4.1 Uneven Agricultural Productivity Growth 16.4.2 Investing in Innovation 16.5 Prospects for the fifty years to come 16.6 Conclusion Acknowledgements References Chapter 17: Structural Transformation and manufacturing employment 17.1 Introduction 17.2 Data, Variables, and estimations 17.3 Results 17.3.1 Value Added Growth as a Function of the Labour Productivity and Employment Growth Rates 17.3.1.1 The Early Industries 17.3.1.2 The Middle Industries 17.3.1.3 The Late Industries 17.3.2 Employment 17.3.2.1 The Early Industries 17.3.2.2 The Middle Industries 17.3.2.3 The Late Industries 17.4 Analysis 17.4.1 Pro-employment Path of Manufacturing Development 17.5 Conclusion Appendix 17A: Regression results Appendix B: Growth patterns of manufacturing industries Appendix C: Changes in employment Appendix D: Changes in labour intensity Acknowledgements Disclaimer References Chapter 18: Global megatrends and the macroeconomics of gender 18.1 Introduction 18.2 Navigating through megatrends—what role for gender equality 18.2.1 Demographic Change 18.2.1.1 Shifting Populations 18.2.1.1.1 Ageing 18.2.1.1.2 Urbanization 18.2.1.2 Reaping the Demographic Dividend 18.2.1.3 Mitigating the Impact of Population Ageing 18.2.1.4 Harnessing Urbanization for Growth and Gender Equity 18.2.2 Globalization 18.2.3 Technological Change 18.2.3.1 Changing Nature of Jobs 18.2.3.2 Catalysing Change to Reduce Income Inequality 18.2.4 Climate Change 18.2.4.1 Accelerate Economic Diversification 18.2.4.2 Mitigating Vulnerability to Climate Change 18.3 Policy options 18.3.1 Where do we stand? 18.3.2 Unleashing Fiscal Policy 18.3.3 Easing the Burden of Non-market Work 18.3.4 Abolishing Legal Restrictions 18.4 Conclusions References Part IV: COUNTRY AND REGIONAL EXPERIENCES Chapter 19: Latin america's structural transformation patterns 19.1 Introduction 19.2 From the commodity export age to state-led industrialization 19.3 Market reforms and premature de-industrialization 19.4 Conclusion Acknowledgements References Chapter 20: India's path to structural transformation: An exception and the rule 20.1 Introduction 20.2 Stylized facts and analytical constructions 20.3 Contours of structural change in india 20.4 Patterns of change: The underlying story 20.5 Different path to transformation Chapter 21: Structural transformation in egypt, 1965–2015 21.1 Egypt's underlying economic problem 21.2 Structural transformation, 1965-2015 21.2.1 GDP and its Components 21.2.1.1 Economic Growth 21.2.1.2 Population and Per Capita Income 21.2.1.3 Structural Changes 21.2.1.4 Investment, Savings, and Total Factor Productivity 21.2.2 Structure of Employment 21.2.2.1 Growth and Structural Change in Employment 21.2.2.2 Trends in Structural Transformation of the Labour Market 21.2.3 Structural Transformation of the External Sector 21.2.4 The Public Finances 21.3 The political economy of structural reform References Chapter 22: Growth and structural transformation in viet nam: The Real Story Beneath 22.1 Introduction 22.2 Selected head-line ratios 22.3 Backward and forward linkage multipliers 22.4 Decomposition of SAM multipliers 22.5 Decomposition of structural change 22.5.1 Decomposition of Change in GDP (Value Added) 22.5.2 Decomposition of Change in Employment 22.6 Summary and policy implications References Chapter 23: Economic reform and structural change: The Chinese Experience 23.1 Returning to a labour-intensive growth path: 1980-1995 23.1.1 Structural Change in Industry, 1980–1995 23.1.2 The Policy Approach of the 1980s 23.1.3 Discussion 23.2 Industrial upgrading, 1995-2013 23.2.1 Structural Change in Industry, 1995–2013 23.2.2 The Policy Approach of the 1990s and 2000s 23.2.3 Discussion 23.3 The end of labour-intensive growth and the shift to a service-led economy after 2010 23.3.1 Services in the Economy 23.3.2 The Policy Environment for a Service-led Economy 23.3.3 Discussion 23.4 Conclusion References Chapter 24: Financing industrial development in korea and implications for africa 24.1 Introduction 24.2 The finalcial system and industrial policy in korea 24.2.1 Financial Control and Industrial Policy 24.2.2 The Roles and Evolution of Several Developmental Banks 24.2.2.1 Korea Development Bank (KDB) 24.2.2.2 Export–Import Bank of Korea 24.2.2.3 Industrial Bank of Korea (IBK) for the SMEs 24.3 Stories of industrial policy and financing 24.3.1 Industrial Policy to Develop a Strategic Sector: The Case of Pohang Steel 24.3.2 Industrial Policy to Develop Bottleneck Technologies for the SMEs 24.3.3 Industrial Policy for Leapfrogging: Digital TV by Public–Private Joint R&D 24.4 Concluding remarks and implications for africa 24.4.1 The Korean Experience of Financing Industrial Development 24.4.2 External Imbalances and Industrial Policy for Export Manufacturing in Africa 24.4.3 Dilemma and Prospects of the Resource-based Development in Africa References Chapter 25: How taiwan managed to grow: Structural Transformation and Industrial Policy 25.1 Introduction 25.2 Import substitution in the 1950s 25.3 Policy reform and the start of export-led growth in 1958 25.4 Secondary import substitution 25.5 Entry into high tech 25.6 Liberalization and delayed adjustment 25.7 Globalization 25.8 Services: Manged opening of the domestic market 25.9 Industrial structural transformation 25.10 Social Transformation 25.11 Recent slowdown and prospects References Chapter 26: Ethiopia: Lessons from an Experiment 26.1 Beyond boom and bust in africa 26.2 Industrial policy and structural transformation in ethiopia 26.2.1 Perspectives on Policy and Transformation 26.2.2 A Strategic Import-substitution Industry 26.2.2.1 The Industry’s Context 26.2.2.2 Policy Instruments 26.2.2.3 Policy Outcomes 26.2.3 The Tale of Two Export Industries 26.2.3.1 Industrial Policy Instruments 26.2.3.2 Linkage Effects 26.2.4 Policy Instruments and Policy Organizations 26.2.4.1 Understanding industrial structure 26.2.4.2 Policy Organizations 26.3 Policy learning and industrial policies 26.3.1 Learning-by-doing and Late Industrialization 26.3.2 Policy Independence 26.3.3 Emulation and Learning from Others 26.3.4 Learning-by-doing: Should a Country Take on Big and Complex Projects? 26.4 The challenges of structural transformation 26.4.1 Politics and the Political Economy of Industrial Policy 26.4.2 Climate Change and Insertion intoGlobal Value Chains 26.4.3 Structural Transformation Constraintsand the Way Forward 26.5 Conclusion: Lessons from an experiment Appendix 26A: Summary of industrial policy review in three sectors Acknowledgements References Chapter 27: Economic transformation in africa from the bottom up: New Evidence from Tanzania 27.1 Where are these firms and what do they do? 27.2 Self-reported motivations of small business owners 27.3 The productive heterogeneity and job creation of small firms 27.4 Policy discussion: What have we learned? 27.4.1 Can Individual and Business Characteristics be Targeted? 27.4.2 Obstacles to Doing Business 27.5 Conclusion References Chapter 28: Growth and structural transformation in the waemu countries 28.1 Introduction 28.2 Measures of structural transformation 28.2.1 Final Consumption as a Measure of Structural Transformation 28.2.2 Composition of Production as a Measure of Structural Transformation 28.2.3 Movement of Employment from the Agricultural Sector to the Other Sectors 28.2.4 Diversification of Production and Exports as a Measure of Structural Transformation 28.3 Presentation and analysis of the growth of the WAEMU economies 28.3.1 Presentation of the West African Economic and Monetary Union (WAEMU) 28.3.2 Analysis of the Growth of the WAEMU Economies 28.4 Structural transformations of the WAEMU economies 28.4.1 Analysis of the Demand Structure 28.4.2 Sectoral Contribution to the Total Value Added 28.4.3 Decrease of Employment in the Agricultural Sector 28.4.4 Diversification of the Production and Export System 28.5 SWOT analysis and recomendations for removing the obstacles to the structural transformation of the WAEMU economies 28.5.1 SWOT Analysis 28.5.2 Recommendations for Removing the Obstacles to Structural Transformation 28.5.2.1 Modifying the Structure of the Final Demand 28.5.2.2 Encouraging Factor Mobility and Sectoral Productivity 28.5.2.3 Encouraging Export Diversification 28.6 Conclusion References PART V: CONCLUDING THOUGHTS Chapter 29: Truth is the safest lie 29.1 Sins, blame, and redemption 29.2 Economics as a prayer: A critique 29.2.1 The Wrong Model Economy and Reference 29.2.2 The Wrong Assumptions and Preconditions 29.3 Enriching and strengthening development thinking 29.4 Concluding thoughts: Promised lands ahead References Chapter 30: The strength of american federal democracy: Lessons for Global Development 30.1 A nation established by thirteen provincial assemblies 30.2 Colonial origins 30.3 Benefits of decentralized democracy 30.4 Applying democracy abroad without decentralization 30.5 Extending democracy at home with federal decentralization 30.6 Empowering immigrants through decentralized democracy 30.7 The inconvenience of decentralization for national elites 30.8 Federalism and the people References Chapter 31: Desirable directions of structural transformation 31.1 Harms of the present structures 31.2 Goals we want our structures to serve 31.3 Structures that offer this desirable goals References Index The Oxford Handbook of Structural Transformation addresses the economics of structural transformation around the world. It deals with major themes, which include history and context, critical issues and concepts, methodological foundations, main theoretical approaches, policy issues, some illuminating country experiences of structural transformation, and important debates on the respective roles of the market and the state in that process.0The historical record provides a challenge for economists to understand the success of the rising economic powers (some of them initially considered unlikely candidates for prosperity) and the stagnation or decline of others. Five major questions emerge: 0* Why has so much divergence occurred among nations of the world since the Industrial Revolution, and particularly during the 20th century? 0* Why has the pattern changed recently with the emergence of a few developing economies (e.g. the multi-polar world), and can it be sustained? 0* What are the key drivers, strategies, and policies, to foster structural transformation in various different country contexts and in a constantly evolving global economy? 0* How could low- and middle-income countries avoid development traps and learn from past experiences whilst exploiting the new opportunities offered by the Fourth Industrial Revolution? 0* What is the role of various development stakeholders and other important players in facilitating sustained economic convergence among nations? 0