Development

Elwyn Davies, Mary Hallward-Driemeier, Gaurav Nayyar, 12 January 2022

Conventional wisdom is pessimistic about the prospects for services-led development, leading to worries about premature deindustrialisation. This column argues that the services sector deserves more credit for helping drive economic transformation than it generally receives. Using firm-level data from 20 developing economies, the authors find that while services establishments are smaller than manufacturing establishments, this matters less for their productivity. Services firms can scale up without sizing up through investments in human and other more intangible forms of capital can leverage the diffusion of digital technologies. 

Michela Giorcelli, Bo Li, 10 January 2022

Understanding which industrial policies work is important to promote the development of poorer countries. This column examines the effects of technology and knowledge transfers on early industrial development, using evidence from the Sino-Soviet Alliance in the 1950s. The authors find that simultaneously receiving technologically advanced capital goods and know-how transfer had large, persistent effects on plant performance, while the effects of receiving capital only were short-lived. The know-how component was essential to generate horizontal and vertical spillovers and production reallocation from state-owned to privately owned companies since the late 1990s.

Louise Guillouet, Amit Khandelwal, Rocco Macchiavello, Matthieu Teachout, 07 January 2022

Developing countries regularly use financial incentives to attract multinational companies in the hope of stimulating knowledge transfers and positive spillovers. This column analyses the role of language frictions in impeding transfers of management knowledge within multinationals using survey and experimental evidence from Myanmar. It finds that potential employers value higher English efficiency and prior multinational experience, and an English language course treatment is shown to improve the English ability of domestic managers, increase their interactions with foreign managers, and increase their involvement in the management of company personnel. 

Enrico Nano, Victor Stolzenburg, 05 January 2022

The role of global value chains for development is often told from a manufacturing or agriculture perspective. This column discusses how the rise of global services value chains offers developing countries with new opportunities by providing jobs, revenue, and productivity growth. In addition, they do so in a more inclusive way than manufacturing. Policymakers need to invest in human capital and address regulatory barriers to services trade to make the most of this development.

Ishan Nath, 24 December 2021

Global warming is expected to dramatically reduce agricultural productivity in hotter parts of the world. This column considers ways to accommodate that change. Hot, poor countries would benefit by shifting away from agriculture into less vulnerable, non-agricultural sectors as temperatures rise, but such a reallocation of resources is unlikely without a major increase in global trade integration. As long as poor countries import little of their food, they are likely to continue specialising in agriculture to meet domestic subsistence needs, even as their farms become increasingly vulnerable to climate change.

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