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economic growth

How to Seize the 85 million Jobs Bonanza

Justin Yifu Lin's picture

Remember the famous joke about an economist who believes so much in rational expectation theory that he would not pick up a $100 dollar bill off the sidewalk under the pretense that if it were actually there someone would have already picked it up? A similar excuse may be invoked to justify why low-income countries that are currently facing high underemployment are not organizing themselves to seize the extraordinary bonanza of the 85 million manufacturing jobs that China will have to shed in the coming years because of fast rising wages for unskilled workers.

Economic development is a process of continuous industrial and technological upgrading in which each country, regardless of its level of development, can succeed if it develops industries that are consistent with its comparative advantage, determined by its endowment structure. As I explained in an earlier blog post for China to maintain GDP growth of nearly 10 percent a year in the coming decades, it must keep moving up the value chain and relocate many of its existing labor-intensive manufacturing industries to countries where wage differentials are large enough to ensure competitiveness in global production networks.

Uzbekistan explores a path to growth

Justin Yifu Lin's picture

Does a remote double-landlocked Commonwealth of Independent States country have the potential to grow at 8 percent a year for the next 20 years? Call me an optimist, but I have just been to the country and I am convinced it’s true. My lecture to a packed audience in Tashkent on ‘Uzbekistan: New Strategies and Opportunities for Structural Transformation’ was well received. Perhaps they were just being extraordinarily polite hosts, but officials there thought my visit marked a transformation point and at the end of my visit, they said they’d start working on a long-term development vision report together with the World Bank and their think tanks.

The recipe for dynamic growth in a developing country is to tap into latecomer’s advantages by developing industries in accordance with its comparative advantages in a well-functioning market economy with the state playing a facilitating role. In the case of Uzbekistan, the potential of late comer advantages have been enormous in many sectors including the traditional ones, such as carpet, garment and horticulture, and modern ones, such as consumer electronics and cars. I visited a carpet factory in Samarkand. Impressed by the owner’s entrepreneurship and the abundant supply of well-educated, disciplined, wage-competitive workers, I am convinced Uzbekistan can out compete Turkey as the world’s production center of synthetic carpets in the coming years.

Managing Capital Flows

Shahrokh Fardoust's picture

With sluggish growth in advanced economies, much investment money is heading south to more favorable climates. And while capital flows can provide greater opportunities for emerging and developing economies to pursue economic development and growth, capital inflows can also pose some serious policy challenges for macroeconomic management and financial sector supervision. Recently, large capital inflows in some middle-income countries have placed undue  upward pressure on their currencies, adversely affecting  macroeconomic and financial system stability as well as export competitiveness in a number of  these countries. Furthermore, the pro-cyclical nature of global capital flows to emerging and developing economics can serve to aggravate these risks.

China’s Special Economic Zones and Industrial Clusters: Success and Challenges

Douglas Zhihua Zeng 曾智华's picture

In the past 30 years, China has achieved phenomenal economic growth, an unprecedented development “miracle” in human history. Since the institution of its reforms and Open Door policy in 1978, China’s gross domestic product (GDP) has been growing at an average annual rate of more than 9 percent (figure 1). In 2010, it has surpassed that of Japan and become the world’s second-largest economy.

Structural Change, growth and jobs

Merrell Tuck-Primdahl's picture

Structural transformation is a key determinant of productivity growth and explains two-thirds of the difference between superior East Asian growth and more muted Latin American growth in the past two decades.

Given the multi-speed paths that regions and countries take as they transform, with some succeeding spectacularly and some struggling to compete, it may be time to consider new industrial and labor policies to ensure that a huge swath of the lower middle class in the developing world doesn’t get left behind in the race to compete in today’s unforgiving global marketplace.

Can service exports drive growth?

Saurabh Mishra's picture

Services can now be stored, traded digitally, and are not subject to many of the trade barriers that physical exports have to overcome. Services are no longer exclusively an input for trade in goods, but have instead become a “final export” for direct consumption. Importantly, services not only have become more tradable, but can also be increasingly unbundled: a single service task or an activity in the global supply chain can now be fragmented and done separately at different geographical locations. This has led to a new channel of growth, what we call sophistication in service exports.

Beyond tumult to transformation: Whither the MENA region

Merrell Tuck-Primdahl's picture

Countries of the Middle East and North Africa (MENA) are a cauldron of wrenching social change. For years pundits have attributed the region's tense social fabric to relatively high population growth rates, a lack of economic diversity, autocratic governments, and, in many countries, on an over-reliance on oil.

Howard Pack, eminent business and public policy Professor at the Wharton School, came to the World Bank earlier this week to share his views on the question of why MENA countries never came close to the equivalent of an East Asian miracle and how they might get on a more successful economic path.

Underutilization of capacity and Ricardian equivalence

Justin Yifu Lin's picture

In a recent blog post “Ricardian Confusions”, Paul Krugman commented on my paper “Beyond Keynesianism and the New New Normal” delivered at the Council on Foreign Relations on Feb. 28. He points out that the government’s fiscal stimulus generally is temporary and households will not increase savings by the full amount of the stimulus. As a result, the stimulus is expansionary even if Ricardian equivalence holds. His comment triggered a series of discussions (Antonio Fatas and Ilian Mihov, Mark Thoma, Paul Krugman, Nick Rowe, and Brad Delong).  
 
I have no disagreement with Paul about the possibility of an expansionary effect of a temporary fiscal stimulus. But if the effect exists and the stimulus does not increase productivity as in his example, there will also be a contractionary effect after the exit of stimulus and the increase of tax to retire the public debts. At the end the issue of underutilization of capacity, which my paper attempts to address, will still be there. 

Gender Equality and the 2012 World Development Report

Justin Yifu Lin's picture
Photo: istockphoto.com

Equality between men and women matters for development, which is why the 2012 World Development Report  (WDR) will focus on this vital topic. Since the 100th anniversary of International Women’s Day is March 8, we thought it an auspicious day to launch the WDR 2012 website.

Gender was chosen as the focus for next year’s WDR in part because gender equality can lead to better development outcomes and because, as Amartya Sen  asserted, development is a process of expanding freedoms equally for all individuals. This view assumes that gender equality is a core goal in and of itself and that people’s welfare shouldn’t be determined by their birthplace or whether or not they were born male or female. 

The 2012 WDR will analyze the wide swath of literature on gender and development and it will highlight the impressive progress in gender indicators on many fronts. However, it will also reveal that in many domains—whether in the realms of power and decision making or maternal health – outcomes for women have improved very slowly or not at all.

Economic development in resource-rich, labor-abundant economies

Justin Yifu Lin's picture

Tackling poverty and inequality through appropriate growth strategies is at the core of the World Bank’s mission. In my view, achieving sustainable and inclusive growth depends on a well-functioning market and to a significant extent also the degree to which government policies facilitate private firms’ upgrading and diversification into industries that are aligned with an economy’s comparative advantages.

To smooth the way and allow this dynamic process to function optimally, we need to answer many questions that are unique to different types of economies. For example, how is it possible to successfully tap a developing country’s comparative advantage when it is rich in resources and has an abundant labor supply?

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