diversification and structural transformation in …...tanzania has potential for horizontal...
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Diversification and Structural Transformation in Developing
Economies
Chris Papageorgiou
Research Department IMF
UNWIDER September 13, 2018
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• IMF is stepping up analysis of macrostructural issues
• Diversification and structural reforms are now at the
center of both policy research and operations
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Diversification
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Dimensions of Diversification
Diversification
Export Diversification
Across Products
Across Partners
Quality UpgradingCountry, Sector,
Product level
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IMF Export Diversification Toolkit
• This toolkit contains two main databases:
❑Export Diversification Database
❑Export Quality Database
• Coverage of the databases
❑Cover 187 countries
❑Time coverage:1962-2015, annual data
• This is an output of Growth through Diversification Project (the IMF-DFID Collaboration)
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02
46
Div
ers
ifica
tion Index
0 20000 40000 60000Real GDP Per Capita
Nonparametric Quadratic
Export Diversification: Cross-Country
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Export Diversification and Quality Upgrading for Growth and Stability
Growth Volatility➢ Robust relationship between
diversification and growth in LICs.
➢ Quality upgrading and sectoral reallocation are linked to higher growth.
• Significant positive relationship between export diversification and reduction in output volatility.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Less Diversified More Diversified
Growth Rate, LICs, 1962-2010
3.6
3.8
4
4.2
4.4
4.6
4.8
5
Less Diversified More Diversified
Volatility, LICs, 1962-2010
Note: “Less Diversified” here means the countries with diversification level below 30 percentile of all LICs; “More Diversified” here means the
countries with diversification level above 70 percentile of all LICs.
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Export Product Diversification Episodes
.1.2
.3.4
.5
He
rfin
dah
l in
de
x
1960 1970 1980 1990 2000 2010year
Div. episode (1969-2000) Herfindahl index
HP Break
Chile
.05
.1.1
5.2
.25
He
rfin
dah
l in
de
x
1960 1970 1980 1990 2000 2010year
Div. episode (1962-91) Div. episode (2004-08)
Herfindahl index HP
Break
Malaysia
0
.05
.1.1
5.2
He
rfin
dah
l in
de
x
1960 1970 1980 1990 2000 2010year
Div. episode (1962-89) Herfindahl index
HP Break
Thailand
.1.2
.3.4
.5.6
He
rfin
dah
l in
de
x
1960 1970 1980 1990 2000 2010year
Div. episode (1983-97) Herfindahl index
HP Break
Ghana
.05
.1.1
5.2
.25
He
rfin
dah
l in
de
x
1960 1970 1980 1990 2000 2010year
Div. episode (1977-95) Herfindahl index
HP Break
Madagascar
.2.4
.6.8
1
He
rfin
dah
l in
de
x1960 1970 1980 1990 2000 2010
year
Div. episode (1967-72) Div. episode (1978-86)
Herfindahl index HP
Break
Mauritania
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.2.4
.6.8
11.2
90
th p
erc
entile
= 1
0 10000 20000 30000 40000Exporter GDP per capita (2000 constant Dollars)
HIC MIC
LIC Lowess Fit
Quality across all Exports
Export Quality and Development❑ Quality upgrading is a crucial component of development, particularly
when trying to move to upper middle-income status
❑ Some countries need diversification, others need quality upgrading.❑ Opportunities in manufacturing, but also agriculture
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Quality Ladders Tanzania
➢ Given its concentration in agricultural products and crude materials,
Tanzania has potential for horizontal diversification but also for
quality upgrading in agriculture.
0.5
11.5
2
Qua
lity (
90th
perc
en
tile
=1
)
010
20
30
40
Pe
rce
nt o
f E
xp
ort
s
Animal&Veg Oils
Beverages and Tobacco
Chemicals
Crude Materials,etc
Food/Live Animals
Machinery and Transport Equip.
Manuf GoodsMinerals
Misc. Manuf ArticlesOthers
Percent of Total Exports Quality Ladder
Tanzania position
Tanzania: Quality by SITC1 Sector, 2010
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➢ China has some additional potential for quality upgrading, but
may also aim to diversify further across products and upgrade
the tasks it performs.
0.5
11.5
2
Qua
lity (
90th
perc
en
tile
=1
)
010
20
30
40
50
Pe
rce
nt o
f E
xp
ort
s
Animal&Veg Oils
Beverages and Tobacco
Chemicals
Crude Materials,etc
Food/Live Animals
Machinery and Transport Equip.
Manuf GoodsMinerals
Misc. Manuf ArticlesOthers
Percent of Total Exports Quality Ladder
China position
China: Quality by SITC1 Sector, 2010
Quality Ladders What is next for China?
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➢Within its two strongest SITC1 sectors, China’s exports seem
tilted towards less sophisticated products, e.g. transport
equipment is lagging behind other machinery.
.4.6
.81
1.2
Qu
ality
(90
th p
erc
en
tile
=1
)
05
10
15
20
25
Pe
rcent of to
tal exp
ort
s
Electrical machinery
Machinery other than electric
Transport equipment
Percent of Total Exports Quality Ladder
China position
Machinery and transport equipment
China: Quality by SITC2 Sector, 2010
Quality Ladders China: zooming into subsectors
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➢ Likewise clothing still dominates within Miscellaneous
Manufactures.
.2.4
.6.8
11.2
Qu
ality
(90
th p
erc
en
tile
=1
)
02
46
810
Pe
rcent of to
tal exp
ort
s
Clothing
Footwear
Furniture
Miscellaneous manufactured articles
Sanitary, plumbing, fixt.
Scientif & control instrumente, etc.
Travel goods and similar articles
Percent of Total Exports Quality Ladder
China position
Miscellaneous manufactured articles
China: Quality by SITC2 Sector, 2010
Quality Ladders China: zooming into subsectors
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Diversification Toolkithttp://www.imf.org/external/datamapper/datasets/SPRLU
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Structural Reforms
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IMF Database• Reform indicators for 90 countries covering LICs, EMs, and AEs from 1973-2014.
• Constructed from multiple sources: previous cross-country databases, countrylegislation, IMF staff reports, FSAPs, among others.
• Unique in terms of country-time coverage and breadth of sectoral areas:
• Financial: credit controls, interest rate controls, bank entry barriers, banking supervision, privatization, and security market development.
• Capital and current account: restrictions on exchange payments and receipts (imports, invisibles, capital).
• Trade: product-level tariffs.• Product markets: ownership, regulation and barriers to entry in telecommunications and
electricity markets.• Labor markets: employment protection legislation including procedural requirements,
firing costs and requirements, and redress measures.
4
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5
Structural Reforms Database – Preliminary Results
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Trade Regulation
Note: Higher values of the indicator denote higher liberalization
12
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Capital Account Regulation
Note: Higher values of the indicator denote higher liberalization
9
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Labor Regulation
Note: Higher values of the indicator denote higher liberalization
8
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Country case: Malaysia
95
100
105
125
120
115
110
130
135
1970 1975 1980 1985 1990 1995 2010
Transition to upper-middle income(1996) GlobalFinancial Crisis (2008-09)
Trade Liberalization
1stGenerationReforms(early1980s-2000)
2nd GenerationReforms (2000-2010)
3rd GenerationReforms (2010onwards)
LaborMarkets
Turnedlower-middleincome (1969) AsianCrisis (1997-98)
...onwards→
Banking System
2000 2005
Capital MarketDev.
Business
Regulations
(TFP Index1970=100)
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Country Examples, 1973-2014
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
18
16
14
12
10
8
6
4
2
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
20
18
16
14
12
10
8
6
4
2
0
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Morocco: Financial Reform Index
0.95
0.9
0.85
0.8
0.75
0.7
0.65
0.6
0.55
0.50
5
10
15
20
25
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Switzerland: Financial Reform Index
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
16
14
12
10
8
6
4
2
0
Ghana: Financial Reform Index Kazakhstan: Financial Reform Index
Interest rate controls
Banking Supervision
International capital flows
Aggregate CreditCeilings
Directed credit/reserve requirements
Entry barriers/pro-competitionmeasures
Privatization
Security Markets
Total Index 16
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Conceptual framework on prioritization
Technology & Innovation
Industry Regulations
Business Regulations
Labor Market
Infrastructure
Banking System
Legal System & Property Rights
Capital Market Development
Trade Liberalization
Agriculture
LIDCs EMs AMs
Refo
rmT
yp
es
IncomeLevel
Highest priority reforms Other priority reforms
Note: Comparisons across reforms within each country group. Darker shades imply larger gains from reforms.
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- 10,000 20,000 30,000 40,000 50,000 60,000
LIDC EM AM
2,449 45,138 PPP Per capita
Agriculture
Diversification
Process
Development
Process
Reform
Priorities
Structural
Transformation
ProcessManufacturing Services
Take-off stage
Steady state
RealFinanci
alLabor
Financial Real Labor
LaborFinanci
alReal
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Thank You!