Economic Integration and Structural Change

Transcription

1 Economic Integration and Structural Change Jean Imbs Paris School of Economics and CEPR Claudio Montenegro The World Bank Romain Wacziarg UCLA, NBER, and CEPR November 15, 2012 Imbs & Wacziarg (2012) Structural Change November 15, / 37

2 Main Questions What characterizes structural change? i.e. how does the allocation of resources across sectors change with development? This is a classic question in economics, going back at least to Kuznets (1966) What determines structural change? What forces a ect changes in sectoral structure? Also a classic question (Chenery, Robinson and Syrquin, 1984) These issues are of renewed policy relevance: E ect of China s emergence on US and EU manufacturing employment Renewed calls for an "industrial policy" in developing countries We have very few facts, and even fewer explanations for these few facts Imbs & Wacziarg (2012) Structural Change November 15, / 37

3 Two established Factors Goods trade Caselli and Coleman (2001), Teigner (2012). But focuses on transition from AGR. Access to nance - Kalemli-Ozcan et al (2003). But focuses on cross-section rather than dynamics. Imbs & Wacziarg (2012) Structural Change November 15, / 37

4 A Robust Fact on Structural Change Countries go through stages of diversi cation Imbs and Wacziarg (2003). Imbs & Wacziarg (2012) Structural Change November 15, / 37

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7 Starting point for this paper The Specialization / diversi cation of economic activity is the outcome of economic integration Structural change re ects two dimensions of economic integration: local (intranational) vs. global (international) integration. Integration has a local component - which is usually overlooked. Structural change is the result of both local and global economic integration. The local dimension is key. Local dimension key in a (very) large literature: Krugman (1991), Krugman and Venables (1995), Desmet and Rossi-Hansberg (2011). But no implications on aggregate structural change. Imbs & Wacziarg (2012) Structural Change November 15, / 37

8 What We Find Sectoral diversi cation in early stages of development is accompanied by geographic agglomeration and "structural divergence". The range of activities expands and factors are allocated increasingly equally across sectors (diversi cation). New sectors localize in speci c, agglomerated regions (agglomeration). Regions become increasingly di erent in terms of what they produce (divergence). Sectoral concentration in later stages of development is accompanied by geographic dis-agglomeration and "structural convergence". The reduced range of activities (specialization) is produced across all regions (dis-agglomeration). The location of activity does not seem to matter as much. Regions become increasingly similar (convergence). Imbs & Wacziarg (2012) Structural Change November 15, / 37

9 Sectors and Regions Region 1 Region 2 Time Sector 1 Sector 2 Sector 1 Sector 2 1 (initial) (intermediate) (developed) Country-level Regional Regional Time Specialization Agglomeration Dissimilarity 1 (initial) (intermediate) (developed) Imbs & Wacziarg (2012) Structural Change November 15, / 37

10 How We Interpret It Low income countries tend to be autarkic - both intra- and inter-nationally. Regions that form the country tend to themselves be autarkic. As local barriers to trade fall (roads, railroads, infrastructure), regions specialize in di erent activities. Country diversi es, Activity agglomerates geographically - and regions become structurally di erent. (Stage I) Integration proceeds to international borders (trade liberalizations, free trade areas, WTO membership, lower tari s, infrastucture for international trade). The country s constituent regions tend to all specialize in the country s comparative advantage. Activity dis-agglomerates geographically - and the country specializes. Regions become structurally similar. (Stage II) NB: Areas composed of countries trading with each other become diversi ed, as they are constituted of countries specialized in di erent activities. Activity agglomerates at country level, Trading countries diverge structurally. Imbs & Wacziarg (2012) Structural Change November 15, / 37

11 How We Verify It (1) Introduce three measures (specialization, agglomeration, dissimilarity), computed on unique datasets on sectoral information at sub-national level. European integration. High-income countries: stage I is completed. Diversi ed countries composed of agglomerated regions. With European integration, each country should go through stage II: all regions in one country should produce the same range of goods, each country should specialize, as activity dis-agglomerates and regions become similar. NB: Europe as a whole should go through stage I: countries specialize in di erent activities, so that Europe diversi es as its constituent countries agglomerate. Imbs & Wacziarg (2012) Structural Change November 15, / 37

12 How We Verify It (2) Simple Ricardian story where goods market integration implies patterns of specialization, agglomeration, dissimilarity. Presence of non-tradable goods implies weaker patterns. U- and hump shapes should be most pronounced on sub-samples focused on traded goods only. Check predictions in data on sectoral information at regional level. Perform splits between traded / non-traded sectors. Especially in developing (India, China) countries. Then check in international panel. Imbs & Wacziarg (2012) Structural Change November 15, / 37

13 The Indices: Sectoral Specialization Simple Her ndahl index of sectoral specialization: S H it = X s P P s j Y ijst P j Y ijst country i, region j, sector s, time t. Y ijst a measure of economic activity - employment or output.! 2 Imbs & Wacziarg (2012) Structural Change November 15, / 37

14 The Indices: Regional Agglomeration Analogous de nition. Regional Her ndahl: A H ist = X j Y ijst P j Y ijst! 2 Captures the allocation of sector s across the regions j that constitute country i. Require sectoral information at sub-national level. Computed sector by sector andaggregated using (time-varying) weight of sector in overall P P economy, j ijst Y P = s j Y ijst. Imbs & Wacziarg (2012) Structural Change November 15, / 37

15 The Indices: Regional Dis-similarity Dissimilarity between regions is captured by an average of bilateral di erences in sectoral shares. For all pairs of regions j and k in country i, compute: D ist = 2 J(J 1) X j<k Y ijst P s Y ijst where J is the total number of regions in country i. Y ikst P s Y ikst Require sectoral information at sub-national level. Computed sector by sector: aggregated arithmetically, since dissimilarity between two regions can be high even if they are specialized in sectors that are small at country level: D it = 1 S X s D ist Imbs & Wacziarg (2012) Structural Change November 15, / 37

16 European Countries The European Statistical Agency (Eurostat) collects regional employment data for member and accession countries. Data are available for a maximum of 14 countries, at one-digit level. Year coverage varies from country to country - so does the number of regions. Data are rectangular over time within each country. Estimation has country xed e ects. Maximum coverage Imbs & Wacziarg (2012) Structural Change November 15, / 37

17 Figure 1: Eurostat - 14 countries Specialization (Herfindahl) Agglomeration(Herfindahl) Dissimilarity

18 Eurostat - Regional Data Table 1: Eurostat - Regional Data Specialization Agglomeration Dissimilarity Low 0:987 ( 1:40) High 0:970 (6:07) 0:173 ( 0:61) 0:229 ( 2:39) 0:265 ( 2:76) 0:175 ( 2:18) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

19 The European Union Stage II: European countries are specializing, each country s regions are dis-agglomerating and becoming similar. Conjecture is this happens as they integrate globally - with the rest of the Union. Thus, the Union as a whole should be diversifying, as its constituent countries specialize in di erent activities. Activity should agglomerate at country level within the Union - and countries should become dissimilar. Can construct an economic area formed by integrating European countries - these are countries that integrate with each other, and so a relevant area. Imbs & Wacziarg (2012) Structural Change November 15, / 37

20 The European Union This exercise does not require regional data, since it is now countries that represent the integrating regions of the EU. Use one-digit sectoral employment from International Labor O ce, on the same 11 countries. Data must now be rectangular for the European Union as a whole - i.e. same sectors and same year coverage. Final coverage includes 14 countries and 8 sectors, : but now ALL countries have observations Unlike Eurostat, which starts collecting regional data on countries as they access the Union, ILO includes sectors that are relatively closed. Traded sectors: Mining and Quarrying, Manufacturing, Transport, Storage and Communication, and FIRE. Non-traded sectors: Electricity, Gas and Water, Construction, Wholesale and Retail Trade, Restaurants and Hotels, Community, Social and Personal Services. Imbs & Wacziarg (2012) Structural Change November 15, / 37

21 Figure 2: ILO - EU 14 Countries Specialization (All) Aggregate GDP per capita Agglomeration (All) Aggregate GDP per capita Dissimilarity (All) Aggregate GDP per capita Specialization (T w/o AGR) Aggregate GDP per capita Agglomeration (T w/o AGR) Aggregate GDP per capita Dissimilarity (T w/o AGR) Aggregate GDP per capita Specialization (NT) Aggregate GDP per capita Agglomeration (NT) Aggregate GDP per capita Dissimilarity (NT) Aggregate GDP per capita

22 ILO Table 2: ILO - Sectoral Data EU pcgdp Specialization Agglomeration Dissimilarity All All All 1:21 ( 4:86) 0:272 ( 1:64) 0:505 ( 3:28) Obs EU pcgdp T w/oagr T w/oagr T w/oagr 7:60 ( 13:11) 0:826 (3:84) 1:38 (9:51) Obs EU pcgdp NT NT NT 0:901 (3:31) 2:81 (10:79) 1:81 ( 7:37) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

23 India Real output data at the one-digit level for a maximum of 28 States From Indian Statistical O ce. Data must be rectangular - i.e. same sectors present in all regions over the whole time period. No missing observations. Sectors (or regions) are dropped so as to maximize coverage. Final coverage of 13 sectors in 25 regions. Traded sectors: Agriculture, Mining and Quarrying, Manufacturing, Transport, Storage and Communication, Banking and Insurance. Non Traded Sectors: Construction, Trade, Hotels and Restaurants, Real Estate, Business Services, Public Administration and Other Services. Imbs & Wacziarg (2012) Structural Change November 15, / 37

24 Figure 3: India Specialization (All) Agglomeration (All) Dissimilarity (All) Specialization (T) Agglomeration (T) Dissimilarity (T) Specialization (NT) Agglomeration (NT) Dissimilarity (NT)

25 India Table 3: India pcgdp Specialization Agglomeration Dissimilarity All All All 80:10 ( 10:34) 19:40 (4:42) 8:57 (6:11) Obs pcgdp T T T 174:10 ( 13:98) 25:01 (4:09) 15:70 (5:46) Obs pcgdp NT NT NT 10:20 (3:56) 9:83 (5:98) 14:40 (5:39) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

26 China Regional employment data at one-digit level for maximum of 30 regions : coverage only includes urban units after 2002, which is undesirable from standpoint of computing regional allocation of employment. Again data is made rectangular. 12 sectors (lose one) and 30 regions. Traded sectors:mining and Quarrying, Manufacturing, Transport, Storage and Communication Services, Finance and Insurance. Non-traded sectors: Electricity, Gas, and Water, Construction, Wholesale and Retail Trade, Catering Services, Real Estate, Scienti c Research and Polytechnic Services, Geological Prospecting and Water Conservancy, Education, Culture and Arts, Radio, Film and Television, Health Care, Sports and Social Welfare, Government Agencies, Party Agencies and Social Organizations, Social Services and Others. Imbs & Wacziarg (2012) Structural Change November 15, / 37

27 Figure 4: China Specialization (All) Agglomeration (All) Dissimilarity (All) Specialization (T) Agglomeration (T) Dissimilarity (T) Specialization (NT) Agglomeration (NT) Dissimilarity (NT)

28 China Table 4: China pcgdp Specialization Agglomeration Dissimilarity All All All 68:30 ( 2:82) 1:83 (8:85) 1:08 ( 1:01) Obs pcgdp T T T 100:10 ( 2:48) 3:07 (9:33) 7:65 (4:54) Obs pcgdp NT NT NT 15:20 (3:98) 1:13 (6:36) 8:97 ( 2:89) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

29 USA Employment (and output) data from BEA. 78 sectors, at the 4-digit SIC level, covering all sectors in 50+1 states Rectangular data: , 69 sectors, all States. Imbs & Wacziarg (2012) Structural Change November 15, / 37

30 Figure 5: USA Specialization Agglomeration Dissimilarity

31 USA Table 5: USA pcgdp Specialization Agglomeration Dissimilarity 0:407 (8:68) 0:333 (9:35) 0:083 ( 12:83) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

32 The World IPUMS census data for 28 countries, out of which 19 developing. Regional employment at one-digit level. Observations from 1960 to 2007, but most countries display fewer than 4 observations. Developing economies - diversify, agglomerate, become regionally dissimilar. Developed countries - specialize, dis-agglomerate, become regionally similar. Especially so in open sectors. Traded sectors are: Agriculture, Hunting and Fishing, Mining, Manufacturing, Transport,Telecommunication, Finance and Business Services. Non-traded sectors are: Construction, Public Administration, Public Services, Retail, Hotels, and Other Services. Imbs & Wacziarg (2012) Structural Change November 15, / 37

33 Figure 6: IPUMS Specialization (All) Agglomeration (All) Dissimilarity (All) Specialization (T) Agglomeration (T) Dissimilarity (T) Specialization (NT) Agglomeration (NT) Dissimilarity (NT)

34 Are these signi cant? Table 6: IPUMS - International Data Specialization Agglomeration Dissimilarity Low 39:80 ( 11:71) High 0:648 ( 1:50) Low High All All All 4:18 (2:78) 0:340 ( 0:86) 0:100 (0:16) 0:834 ( 10:23) T T T 49:80 ( 12:38) 3:27 ( 3:96) Low 2:73 (1:20) High 1:73 (3:26) 6:73 (3:95) 0:006 (0:01) 7:19 (6:64) 1:54 ( 9:02) NT NT NT 5:34 ( 3:50) 0:067 ( 1:74) 6:93 ( 4:16) 0:712 ( 4:18) Obs Imbs & Wacziarg (2012) Structural Change November 15, / 37

35 Output Data IPUMS is census data. Employment can display trends opposite to production because of productivity. Use output data where available. From national statistical agencies, data on real value added for 14 countries (9 of which are developed). Time series dimension much larger (15 observations on average) Traded sectors are: Agriculture, Hunting and Fishing, Mining, Manufacturing, Finance and Business Services. Non-traded sectors are: Construction, Public Administration, Public Services, Retail, Hotels, and Other Services. Imbs & Wacziarg (2012) Structural Change November 15, / 37

36 Figure 7: Examples with Output Data Colombia - Specialization (T) Colombia - Agglomeration (T) Colombia - Dissimilarity (T) Japan - Specialization (T) Japan - Agglomeration (T) Japan - Dissimilarity (T) UK - Specialization (T) UK - Agglomeration (T) UK - Dissimilarity (T)

37 Figure 8: Output Data Specialization (All) Agglomeration (All) Dissimilarity (All) Specialization (T) Agglomeration (T) Dissimilarity (T) Specialization (NT) Agglomeration (NT) Dissimilarity (NT)

38 Are these signi cant? Table 7: Real Value Added Data - National Sources Specialization Agglomeration Dissimilarity All All All Low 15:70 ( 3:48) 1:91 (1:87) 0:760 ( 1:80) Medium 0:601 ( 6:43) 0:229( 1:49) 0:443 ( 10:20) High 0:138(0:98) 0:396 (1:95) 0:088 ( 1:86) T T T Low 26:70 ( 2:86) 5:29 (3:57) 5:40 (3:90) Medium 7:29 (14:98) 0:381 ( 2:23) 1:95 ( 10:68) High 1:34 ( 1:69) 3:01 (3:61) 1:11 (3:80) NT NT NT Low 4:70 ( 2:97) 0:058( 0:06) 3:59 ( 2:85) Medium 0:698 ( 6:47) 0:166( 0:96) 0:661 ( 8:49) High 0:491 (2:64) 0:501 ( 4:39) 0:084(0:78) Imbs & Wacziarg (2012) Structural Change November 15, / 37

39 Conclusion Proposed a mechanism that explains jointly structural change, geographic agglomeration and regional convergence in sectoral structure. Structural change is a proximate symptom of economic integration. The local dimension is essential. "Diversi cation" re ects domestic integration. "Specialization" re ects international integration (and regional convergence). The stages of structural change re ect the balance between the two. From a policy standpoint: 1 Stage I: diversi cation can be triggered by infrastructure investment for local integration. 2 Stage II: preserving diversi cation implies limiting international trade. Imbs & Wacziarg (2012) Structural Change November 15, / 37