Rethinking economic growth and structural change: The role of boundaries and linkages between industries

Charlotte Guillard, UNU-MERIT

Economic development is associated with changes in production and export structures. Each country masters a set of capabilities and by developing additional capabilities countries can produce more complex products or technologies. Two central questions are then in order. How can countries add new products to their production? How does the change in their productive structure affect their growth dynamics? In this thesis, I provide empirical evidence of the importance of both boundaries and linkages between industries to understand structural change and the dynamics of economic growth.

First, this thesis provides information on the factors influencing the emergence of clusters of products and show that the traditional divide between high/medium-tech versus low-tech is only part of the explanation. I also find that technological domains and boundaries between industries are not always clear-cut and can evolve over time. Second, I study economic growth dynamics by examining the characteristics and structural change determinants of transitions between different medium-term growth regimes rather than focusing on average growth variation, sensitive to volatility due to business cycles. Results indicate that the effect of the manufacturing sector on economic growth is far from uniform and that the measure of economic structure also matters. Additionally, clusters with similar technological intensity play a different role in the dynamics of growth, and, global value chains (GVCs) may explain some of these differences. Finally, differences between industries affect not only the growth process through productivity gaps, but also the stimulation they provide to the rest of the economy through production linkages, especially in a growingly interconnected world. In this dissertation, I examine the impact of inter-industry interconnections on economic performance, focusing on demand dynamics (i.e. backward linkages). I relax two strong assumptions associated with the traditional calculation of the output multiplier, which makes it possible to estimate the degree of response to demand shocks from the supplying industries. Results show that there are significant differences across industries and countries. Manufacturing industries, and in particular final consumer goods ones, tend to be less responsive to shocks in demand relative to services. Significant differences are also observed between countries since manufacturing industries in developed countries tend to be less sensitive to demand shocks than in developing countries.



Venue: Aula, Minderbroedersberg 4-6

Date: 27 November 2019

Time: 12:00 - 13:30


UNU-MERIT