Barriers to Growth-Enhancing Structural Transformation : The Role of Subnational Differences in Intersectoral Productivity Gaps
The movement of workers from the farm sector to a more productive nonfarm sector has failed to generate significant gains in labor productivity in recent decades in many developing countries. This paper offers a new perspective on the barriers to g...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/563371622557285922/Barriers-to-Growth-Enhancing-Structural-Transformation-The-Role-of-Subnational-Differences-in-Intersectoral-Productivity-Gaps http://hdl.handle.net/10986/35645 |
| Summary: | The movement of workers from the farm
sector to a more productive nonfarm sector has failed to
generate significant gains in labor productivity in recent
decades in many developing countries. This paper offers a
new perspective on the barriers to growth-enhancing
structural transformation, combining structural modeling
with enterprise census data from Ghana. The paper argues
that subnational differences in the intersectoral
productivity gap between the nonfarm informal and formal
sectors constrain the productivity gain from structural
transformation. In Ghana, intersectoral productivity gaps
among the richer regions are on average three times larger
than among the poorer regions. The disparity in regional
intersectoral productivity gaps is modeled as reflecting the
disparity in the regional misallocation of labor between the
informal and formal sectors. Misallocation is identified as
the output wedge between the informal and formal sectors.
Simulations suggest that a more productive nonfarm informal
sector reduces the disparity in regional intersectoral
productivity gaps and, in turn, increases national
productivity and the contribution of structural
transformation to national productivity. For example, a
90-percent reduction in the disparity in regional
intersectoral productivity gaps raises Ghana’s national
aggregate productivity by 11.9 percent and the contribution
of structural transformation to productivity by 19.7 percent. |
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