The Role of Technology and Innovation inInclusive and Sustainable Industrial Development

Prof. Shigeru T. OTSUBO
GSID, Nagoya University

Topic 1

World Productivity Distribution
Past, Current, and Steady-State Gaps

&The Role of Technology Transfer

Motivation

The wealth of a nation is not measured byits supply of precious metals, but by theproductivity of its labor force.
- Adam Smith, 1776

6

Solving the puzzle of missing ‘development’ through‘productivity’ analyses & comparative institutional studies…

Source: Mendez-Guerra, C.(2012) On the Determinants of Bolivia's Economic
Growth: Productivity and Institutional Puzzles, Master Thesis, Nagoya University.

Movingahead
FallingbehindRelativeOuput andper Workerby Region
Relative Output per Worker (U.S.=100)

40
Asia

3530

Latin America

25
20
1510Africa

501960

1965

1970

1975

1980

1985 1990
Year

1995

2000

2005

2010

Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAP
LAMBERT Academic Publishing29

Relative Output per Worker (US=100)

120

Singapore

100

80

Japan
South Korea

60

40

Malaysia

20Thailand
China

01960

1970

1980

1990

2000

2010

Year
Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAP
LAMBERT Academic Publishing

China(CH2)
Indonesia(IDN)
Japan(JPN)
Korea Rep.(KOR)
Malaysia(MYS)
Philippines(PHL)Singapore(SGP)
Thailand(THA)
AVERAGE

Relative Output per Worker
1960
1985
2010
4.04
4.76
15.74
4.71
8.03
9.79
29.73
77.55
73.63
14.38
32.80
65.95
11.21
21.93
34.44
10.38
9.40
9.34
34.09
66.05
122.75
5.15
9.65
17.19
14.21
28.77
43.60

Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAPLAMBERT Academic PublishingWhat about the shape of World
Productivity Distribution?
World Productivity Distribution.024

Density of Countries.021960.016

An Advent of Twin Peaks
1985.012.008.004

201000204060

80100120Relative Output per Worker (U.S.=100)
Source: Mendez-Guerra C. (2015). The World Productivity Distribution: Convergence and Divergence Patterns in the Postwar Era, Latin American Journal of Economic
Development , Vol (24) , pp79-96.

Determinants of Labor Productivity (Y/L)

Productivity depends on the equipment,
skills, and technology available to workers.
- Solow, 195731Model• Based on Jones (1997), consider thefollowing economy:• In steady state:• In relative terms (USA=1):

Calibration of Parameters

Parameter
αφgA+δ

Calibration
1
3

0.10
0.075

SourceMankiw, Romer, and Weil (1992)
Psacharopoulos and Patrinos (2004)
Mankiw, Romer, and Weil (1992)

35

Evolution of the Labor Productivity
Distribution (Base Model)
How might the world productivity distribution look like in Steady State?

Cumulative World Productivity Distribution
1.9
Steady State

Share of Countries.8

1960

2010.7.6.5.4.3.2.1
00.1.2.3.4.5.6.7.8.9
1
Relative Ouput per Worker (U.S.=1)

1.1

1.2

1.3

1.4

Source: Mendez-Guerra C. (2015). The World Productivity Distribution: Convergence and Divergence Patterns in the Postwar Era, Latin American Journal of Economic Development , Vol (24) , pp79-96.

Simulations Scenarios
1. Inputs Convergence– What if developing countries had the samelevel of equipment and skills but keep theirown level of technology?

2. TFP Convergence– What if developing countries had the samelevel of technology but keep their equipment
and skills fixed?

Scenario 2: “TPF” Convergence
How big is this effect?

Cumulative World Productivity
Distribution.911960

2010

Share of Countries.8.7.6SS.5

SS1

SS2

2nd Jump: Brain/Ideas—High-Level Human Capitalis the Key.4.3

1st Jump: Sharing the contents of TFP,
Technology Transfer is the Key.2.1
00 .1 .2 .3 .4 .5.6 .7 .8.9 1 1.1 1.2 1.3
Relative Ouput per Worker (U.S.=1)

1.4 1.5 1.6

Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAP
LAMBERT Academic Publishing42How might the world productivity
distribution look like in the future?
World Productivity Distribution
21960

Density of Countries

2010
1.5
SS
1

Middle-Income (Middle-Productivity)
Trap can be avoided by sharing thecontents of TFP and brains/ideas.

SS1.5

SS200.5
1
Relative Output per Worker (U.S.=1)

1.5

Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAP
LAMBERT Academic Publishing461960
2010
Steady State
Input Convergence
TFP ConvergenceLong-Run Relative Ouput per Worker
ASEAN3 Thailand Lat. America
AsiaAfrica
0.14
0.05
0.28
0.15
0.07
0.42
0.17
0.23
0.37
0.05
0.51
0.19
0.18
0.42
0.05
0.53
0.27
0.32
0.50
0.13
0.93
0.71
0.55
0.75
0.33

Source: Mendez-Guerra C. (2015). Essays on Aggregate Productivity, Structural Change, and Misallocation. Saarbrücken: LAP
LAMBERT Academic PublishingTopic 2

Research Agenda & Policies
forInclusive Industrial Development

[Inputs to Labor Productivity]
Capital Deepening & Skill Development
Brain-Power Networking (highly innovative HR)
is needed to get out of the ‘Middle-Income Trap’ andat the higher end of productivity growth.

✚[Inside the TFP Blackbox]
Technology Transfer & Product/Process Innovations
Institutions and Policies for Industry Promotion
Institutions and Policies to move workers toward
sectors/industries with higher productivity growth.
Reduce the Loss of (Labor) Misallocation

Inclusive Industrial Development
Sustainable Society

19

UNIDO IDR2016 Messages …
Premature deindustrializaion is detrimental
Premature shifts of labor into unproductive service
sectors….. NO
Trade liberalization without preparedness thathinders industrial development….. NOHigh relevance to the Bolivian caseTechnology transfer & innovations through globalintegration such as GVC
Pooling financial/research resources in a global
knowledge base for a hightened technological capabilities….. More…..

Inclusive Industrial Development (ISID)20

Topic 3

What we expectfrom UNIDO and the IDR Team…..

My Wish List

Following the tradition of productivity promotion (e.g.
Productivity Reports), continue to support creation ofproductive and competitive industries.
Eternal pursuit of the contents of TFP (not as ameasurement of ignorance). Support institution building and(industrial) policies in order to reduce ‘Misallocation’ of labor
force for ‘Inclusive’ industrial development.
Support/develop well-coordinated intellectual
networks in order to seek a way out of the ‘Middle-income
Trap.’
Analyze/utilize the roles of FDIs and MNCs (GVC) in
productivity/technology improvements both in net andgross output functions.

The End …..

References• Jones C. (1997). Convergence Revisited. Journal of Economic Growth
2 (2): 131–53.
• Mankiw, G., D. Romer, and D. Weil. (1992). A Contribution to theEmpirics of Economic Growth. The Quarterly Journal of Economics
107 (2): 407–37.
• Mendez-Guerra, C.(2012) On the Determinants of Bolivia's Economic
Growth: Productivity and Institutional Puzzles, MasterThesis, Nagoya University.
• Mendez-Guerra C. (2015). Essays on Aggregate Productivity,
Structural Change, and Misallocation. Saarbrücken: LAP LAMBERTAcademic Publishing• Mendez-Guerra C. (2015). The World Productivity Distribution:
Convergence and Divergence Patterns in the Postwar Era, Latin
American Journal of Economic Development , Vol (24) , pp79-96.