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New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development

Author

Listed:
  • Herrendorf, Berthold
  • Rogerson, Richard
  • Valentinyi, Akos

Abstract

Moving labor from agriculture to manufacturing - "industrialization" - is often viewed as essential for the development of poor countries. We present new evidence on the channels through which industrialization can help poor countries close the productivity gap with rich countries. To achieve this, we leverage recent data releases by the Groningen Growth and Development Centre and build a new dataset of comparable labor productivity levels in agriculture and manufacturing for 64 mostly poor countries during 1990--2018. We find two key results: (i) cross-country labor productivity gaps in manufacturing are larger than in the aggregate and (ii) there is no tendency for manufacturing labor productivity to converge. While these results challenge the notion that expanding manufacturing employment is essential for the development of today's poor countries, we also find that higher labor productivity growth in manufacturing is associated with higher labor productivity growth in the aggregate and in several key sectors.

Suggested Citation

  • Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Akos, 2022. "New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development," CEPR Discussion Papers 17085, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17085
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    Cited by:

    1. Klein, Alexander & Crafts, Nicholas, 2023. "Unconditional Convergence in Manufacturing Productivity across U.S. States: What the Long-Run Data Show," CEPR Discussion Papers 18065, C.E.P.R. Discussion Papers.
    2. Ali Sen, 2024. "Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters," Working Papers 048, The Productivity Institute.
    3. Clément Nedoncelle & Julien Wolfersberger, 2023. "Structural transformation and international trade: Evidence from the China shock," WIDER Working Paper Series wp-2023-64, World Institute for Development Economic Research (UNU-WIDER).
    4. Ponticelli, Jacopo & Bustos, Paula & Castro-Vincenzi, Juan & Monras, Joan, 2018. "Industrialization without Innovation," CEPR Discussion Papers 13379, C.E.P.R. Discussion Papers.
    5. Naudé, Wim & Tregenna, Fiona, 2023. "Africa's Industrialization Prospects: A Fresh Look," IZA Discussion Papers 16043, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    agriculture; Convergence; Industrialization; Manufacturing; Productivity gaps; Spillovers;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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