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Published in: Journal of Economics and Finance 4/2020

20-12-2019

Manufacturing as a Growth Escalator in Low and Middle Income Countries

Authors: Ummad Mazhar, Fahd Rehman

Published in: Journal of Economics and Finance | Issue 4/2020

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Abstract

Two competing explanations are offered for the recent structural dynamics in developing countries. For traditionalists, structural transformation implies an inverted U-shaped trajectory for manufacturing share. However, this is not the case in the new view where a knowledge driven economy can bypass the intermediate stage of manufacturing. The empirical evidence from 52 countries covering 1990 to 2013, seems to favor the old view. The increasing share of services decreases the growth rate of per capita national income. In contrast, manufacturing acts as a growth escalator. Though the magnitude of elasticity of per capita income with respect to both manufacturing and services is less than unity the influences are statistically significant. These findings withstand the usual robustness tests and do not seem to reflect reverse causality. Together these findings help explain the phenomena of jobless growth experienced by many countries.
Appendix
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Footnotes
2
For its initial years the World Governance Indicators provide governance indicators for alternative years i.e. 1996, 1998, and 2000. It is only after year 2000 that indicators are available on yearly basis.
 
3
The message of our analysis remains unchanged if we augment the baseline specification (in Table 2) by including, in turn, the dummy variable representing land lock countries, controlling for the influence of legal origins of countries, or the average level of political democracy.
 
4
We are thankful to the anonymous referee for suggesting these extensions.
 
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Metadata
Title
Manufacturing as a Growth Escalator in Low and Middle Income Countries
Authors
Ummad Mazhar
Fahd Rehman
Publication date
20-12-2019
Publisher
Springer US
Published in
Journal of Economics and Finance / Issue 4/2020
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-019-09504-5

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