Industry and policies

Manufacturing and its Relationship with GDPI

MPI: Manufacturing is highly related to GDPI. Manufacturing is related to lower poverty and few countries have a higher level of manufacturing. Analysis on industrial development and certain aspects. China is a strong exporter of manufacturing. Higher technology values with countries with larger manufacturing and China is experiencing a moving from a lower to a higher percentage. It is not only the factory of the world, but it is also an entering market increasing for higher technology goods. Same is not happening to LDC, we are realizing that dynamic industry and dynamic sectors are different. Industry creates employment. Manufacturing more productive, we have a higher product of industry. It increases with higher productivity.

How firms are behaving in development capabilities and the dynamic industrial set

Paper: Ghani and O'Connell. Service sector which starts with the title (Can service be a growth escalator in low-income countries?). Traditionally service sector was connected to a slow

theconvergence services: countries having a higher rate of change on the vertical axe, are those that at the lower levels at the starting level. They start behind and the rate of work is increasing faster. There is a curve and a process of economic convergence in the service sector.

For manufacturing is a bit different. The significance of the regression line is almost horizontal, and the significance of the regression is lower than the other concerning services. The service sector is converging and give many opportunities.

In this sense we have a contribution of the annual rate and how faster the sectors are growing, changing the GDP. This exempt China in the manufacturing sector economy.

What happens to employment? In this sense we can see how the large GDP per capita is changing from poor to rich and the employment share. In a nutshell, in terms of employment, service sector is more efficient.

However, some caution: The dividing line between manufacturing and services is becoming increasingly blurred.

Industrialized developing countries tend to be richer. The manufacturing sector offers special opportunities for capital accumulation compared to agriculture. Capital accumulation is one of the aggregate sources of growth. Thus, an increasing share of manufacturing and industry will contribute to aggregate growth.

Growth will be due to the structural transformation of the economy to the manufacturing sector. Productivity is higher in the sectors of highest levels of productivity. The transfer of resources from agriculture to manufacturing provides a structural change bonus (dynamically = manufacturing has higher rates of productivity growth than other sectors) on international markets.

The manufacturing sector lowers dependence and reduces the impact of fluctuations in raw materials prices and structural deterioration of terms of trade (Prebusch – Singer…) opportunities for economies of scale, which are less available in agriculture.

1. Agriculture of services.
2. Manufacturing isn't developing countries' business.
3. Primary goods represent the higher percentage in this sector.
4. Considering that for example KSA is strong on oil.
5. Arguments in favor of industrialization as the main engine of growth in economic development:
1. The manufacturing sector offers special opportunities for both embodied and disembodied technological progress (Cornwall 1977).
2. Technological advance is concentrated in the manufacturing sector and diffuses from there to other economic sectors such as the service sector.
3. Linkage and spillover effects are stronger in manufacturing than in agriculture or mining. Linkage effects refer to the direct backward and create positive forward linkages between different sectors, they externalities to investments in given sectors. Spillover effects to the disembodied knowledge flows between sectors.
4. As per capita incomes rise, the share of agricultural expenditures in total expenditure declines and the share of

Modern sectors are much more productive than rural sectors. It is important to understand how economic growth is directly connected to sectors and models. The Lewis model exploits the synergy of these two different models. Of course, the type of production and consumption in the food industry is different. The main argument is the interdependence of these two sectors in the Lewis model.

The typical unit of production in the economy sector is from A to B. Profits improve the MPL (Marginal Product of Labor) upwards in a second MPL. By moving labor from agriculture to the industrial sector, there is a lower employment of labor that can feed the entire population.

Karl Marx believed that capitalists reinvest profits in machinery, pushing production forward. In Maoist theory, the state invests in productivity.

Answers:

• Capitalists do not invest = no additional investment? Just having profits and that's it.
• Taxes: if workers move to the industry, fewer workers are in agriculture, capital income growth => taxes. In this way

Wages in agriculture remain low instead of staying in agriculture. People move to have an additional income in the industrial sector, making agriculture less attractive. So, why should one invest in agriculture?

Instead of causing a shift in production, we should focus on technical advancements. It is convenient to use technology, and the employment of labor is different.

There is no consideration for the demand of goods. If countries move towards a larger GDP, agriculture will decline while services will grow. Productivity is a relevant factor as it affects the levels of productivity. Productivity is behind the diagram, meaning that one sector is more advanced than the other. This is a common pattern of transformation observed in countries with a higher share of agriculture when they are poorer, and less when they become rich.

Dualism is present, where some labor is employed very well while others are not. Productivity is employed in all sectors.

1 See McMillan and Rodrik papers

The need for a micro-approach to explain...

• Colors to different sectors; there is a lot of the labor productivity instead of manufacturing. In the second we have differences in the productivity level.
• Resources are allocated for maximizing productivity, but in the first graph we have less employability in the agriculture sector.
• In this sense we have – better paid, more movement – this because we live in a free trade economy. In any economy there’s a bit of everything.
• Manufacturing is more productive because it produces a lot, such as better skills. The model we are studying is made specifically for developing countries.
• Regression line: it is declining. To what extent there are gaps in productivity sector, here we can see that as productivity grows, low is the coefficient of variation in the labor productivity so less variance. So as much as a country is advanced, less the dualism is present. The driver is shifting from low to higher productivity sectors.
• Here it is calculated the change of productivity by