The graph reveals a strong negative correlation between inequality (measured by the share in total GDP of the richest 10% as compared to the poorest 10%) and the degree of technological intensity of the production structure (measured by value added per capita in the engineering industries). In general, when knowledge-intensive activities in the economy are few, and employment concentrates in low-productivity jobs, a large share of total labor is allocated in low-paid jobs or in the informal sector. This heightens inequality. Inversely, a diversified economy with many knowledge-intensive sectors implies faster learning and the accumulation of complementary capabilities. A denser, more integrated production structure leads to more high-productivity jobs and faster productivity growth. This in turn fosters economic growth, employment and income distribution.
by Mario Cimoli and Gabriel Porcile (ECLAC) Source: Economic Commission for Latin America and the Caribbean (ECLAC) with information of CEPALSTAT; World Bank, "World Development Indicators" (WDI); Organisation for Economic Co-operation and Development (OECD), "Income Distribution and Poverty" and "STAN Database" and United Nations Industrial Development Organization (UNIDO), Industrial Statistics Database. The graph reveals a strong negative correlation between inequality (measured by the share in total GDP of the richest 10% as compared to the poorest 10%) and the degree of technological intensity of the production structure (measured by value added per capita in the engineering industries). In general, when knowledge-intensive activities in the economy are few, and employment concentrates in low-productivity jobs, a large share of total labor is allocated in low-paid jobs or in the informal sector. This heightens inequality. Inversely, a diversified economy with many knowledge-intensive sectors implies faster learning and the accumulation of complementary capabilities. A denser, more integrated production structure leads to more high-productivity jobs and faster productivity growth. This in turn fosters economic growth, employment and income distribution.
3 Comments
Marcos
26/5/2014 06:16:45 am
Hi
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Gabriel Porcile
28/5/2014 07:31:46 am
Dear Marco, thank you very much for your comment. The actual graph has been posted; please see the sources in the footnote. As usual, correlations do not mean causality nor replace a full regression. This is more a kind of stylized fact that invites further discussion. The effect of structural change on inequality might be related to the creation of better jobs—if you want to move people from low-productivity sectors to high-productivity sectors you need to diversify the economy towards these high-productivity activities, which in turn means structural change. Another effect may occur through the positive effect of a more diversified and knowledge intensive production structure on growth 9and employment). We will come back later to the topic of growth and structural change.
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Marcos
28/5/2014 09:18:42 am
Thanks, Gabriel Your comment will be posted after it is approved.
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