Transcript A technological capability story behind exports of fish fillet and iPods

A technological capability story
behind exports
of fish fillet and iPods
Vandana Chandra
(Joint work with Jessica Boccardo, and Israel Osorio)[1])
October 15, 2007
[1] The views and interpretations in this document are those of the authors and should not be
attributed to the World Bank, or to any individual acting on its behalf.
Outline
 Background – uneven growth across regions
 Relationship between income differentials and trade and technology –
raises many questions…
 What explains these income differentials? Export mix. ?
 Technology definition – deterministic
 Other explanations – Natural Resource Curse? Is SSA special? – also
deterministic
 These explanations do not explain the link between technology, trade
and income - need an alternative approach
 What determines it?
 What can it explain?
 Policy implications
 Lessons
Manufactured products
Rich
countries
Technology
Transfer
Poor
countries
?
Primary products
Hi Tech (iPods)
Sophisticated Exports (Fish Fillet)
China
Chile
India
Kenya
Malaysia
Background – uneven growth
 1980s – 2004: GDP per capita increased - all regions
 BUT the gains were hugely uneven. Winners: First and Second East Asia
 Country level - China (425 %), Korea (225%), Thailand (150 %), Malaysia
(100 %), India (100 %)
Regional average GDP per capita
SA
SSAnoZAF
CHN
Second_EA
LAC
First_EA
0
5,000
10,000
15,000
Average GDP per capita (constant 2000 US$)
1990-95
Data: W DI
2000-04
20,000
3 Questions
In a world where comparative advantage determines the
pattern of trade:
 How can a country become richer?
Export more of the same.
 Why did some developing countries
become richer and others not?
 Among other things, do trade and
technology explain this?
What explains the differences in income levels over time
within a region, and between regions?
 Macro
Stability?
Regional average Total exports/GDP
SA
 Openness?
LAC
CHN
Not the full
story
SSAnoZAF
Second_EA
 Is it the
Export
Mix?
First_EA
.8
.6
.4
Total exports/GDP, (%)
1990-95
Data: WDI and COMTRADE
.2
2000-04
0
(A)


Technology classification - Lall (2000)
Links a product to its technology content.
Cereals and fish are primary (PP), minerals are resource-based (RB) and
manufactured products are low, medium or hi tech (LT, MT,HT)
Regional export Composition
Tech categories 2000-04
0
0
.2
.2
.4
.4
.6
.6
.8
.8
1
1
Tech categories, 1990-95
First_EA
HT
OECD
MT
SA
LAC
LT
SSAnoZAF
RB
PP
First EA: HKG, TW N, KOR and SGP
First_EA
HT
OECD
MT
SA
LAC
LT
SSAnoZAF
RB
PP
First EA: HKG, TW N, KOR and SGP
 Problem: Too deterministic and ad hoc. Implies manufactured
exports are the path to growth..
Other explanations for differences in
the export mix
(B) Country characteristics constrain diversification and growth
1. Is there a natural resource curse? Prebisch and Singer
in 50s and 60s and Sachs and Warner ’90s). In reality, ‘neither curse
nor destiny” - Lederman and Maloney ,2007; Bonaglia and Fukasaku,
2003.
2. Is Sub-Saharan Africa special? Transactions costs,
and
risks of manufactured exports (Collier, 1998, 1999), low skills, land
abundance (Mayer and Woods, 2001) and low Net TFP (Eifert, Gelb and
Ramachandran, 2005); infrastructure (Habiyaremya and Ziesemer,2006)
Main implication of this research:

Deterministic - In poor countries, manufactured exports are the
PATH to growth
More questions about differences in the export
mix

Technology is transferred from rich to poor countries. BUT, it is not
reflected in the pattern of trade. WHY?
•
If off-the-shelf tehnologies are available to all – why do only some poor
countries adapt them to grow faster?
One explanation – differences in technological
capabilities….
The Pattern of trade has changed:
1. East Asia – exports Hi-tech iPods!!
2. Some other countries reversed pattern in select sectors: China
replicated East Asia, India, Chile, Kenya…
3. India technological capabilities reversed historical flows of services
Need a concept that explains this phenomenon.
Sophistication of a Product: PRODY
Designed by Hausmann, Hwang and Rodrik (2005). (Lall (2005)..)
Reflects the per capita GDP of each country that exports the product weighted by the
exporter’s revealed comparative advantage in it.
Attaches to each product a value that reflects the income potential/level of the product.
Prody value of selected Products (by tech category)
30,000
20,000
15,000
10,000
5,000
HT & MT
LT
RB
PP
Coffee,whether
or not roasted
Potatoes,fresh
or chilled
Bacon,ham &
other dried
Printing and
writing paper
Fish,prepared
or preserved
Knitted/croch.
fabric
Articles of
leather
Television
receivers
Wood- and
resin-based
chemical
prods.
Internal
Combustion
piston engines
0
Electronic
microcircuits
Prody ( in US$)
25,000
Prody of the Top 50 products explains
GDP per capita
Q: What determines the ‘Prody Top50’ of a country’s export basket? Its
technological capabilities.
First EA.
OECD
25000
10000
10000
9000
8000
7000
15000
6000
5000
10000
4000
3000
5000
2000
Prody50 and GDP( in US$)
20000
20000
8000
7000
15000
6000
5000
10000
0
0
GDP
Prody50
SSA
4000
3000
5000
2000
1000
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Prody50 and GDP( in US$)
9000
1000
0
0
GDP
Prody50
4500
Prody50 and GDP (in US$)
25000
4000
3500
3000
2500
2000
1500
1000
500
0
GdpSSA
Prody50
Technological capabilities have a large tacit element.
Difficult to measure.
So, we use 3 concepts that measure what they can do or produce.
(1) Stock of patents
Innovation over time
0
5000
0
50000
patentF_EA
100000
Stock of patents in OECD counties
10000
Stock of patents in First Tier EA
1960
1970
1980
year
1990
2000
1960
1970
1990
2000
Stock of patents
0
0
50
50
100 150
100150200250
Stock of patents
1980
year
1960
1970
1980
year
Second_EA
1990
2000
LAC
1960
1970
1980
year
SA
1990
SSA
2000
Technological Capabilities
2) Imports of Computers per Capita
3) Exports of Ht&Mt to Developed countries(% of total exports)
First Asia in
2000
Exports of Ht&Mt to
DEv/total exports
0.004
0.002
0
-0.002
Second EA
LAC
SA
Rest EA
SSA
-0.004
-0.006
-0.008
-0.01
-0.012
Imports of Computers per
capita
Imports of Computers per capita
Computer Penetration in 2000
0
First EA
-0.05
-0.1
-0.15
-0.2
Exports of High and Medium Tech products to Developed
Countries in 2000
0.4
0.2
0
First EA
Second EA
LAC
RestEA
SSAnoZAF
SA
Determinants of Sophisticated
exports - model
 Dependent variable: Share of PRODY of
Top 50 exports
 Explanatory variable: technological
capabilities (3)
Results: A positive and significant relationship
between export sophistication and each
technological capability variable.
Openness matters.
Policy implications – no short cuts to capability building
Technology can be imported. Technological capabilities cannot. TACIT.

Need to be built domestically and monitored. Monitorable indicators,

Country-specificity is key – sensitivity to institutions

Openness to trade and FDI not sufficient.

Higher education is necessary but not sufficient.

Complementary policies could include:
– Skills and training focused on building indicators of capabilites - science,
technology/engineering, ICT, management education – market failures
point to an important role for public policy
– Regulation of phytosanitary standards and quality control
– Informational externalities - facilitate firms’ access to global market;
logistics; marketing; national brand name promotion (Chilean wine, Indian
grapes)
– Coordination externalties
– Others…
Lessons Learned (1)…

To leapfrog – a country needs to diversify into
sophisticated products.

First East Asia demonstrated this; Second East Asia
repeated it; China has replicated this; others are
replicating too in select sectors – need to scale up

Crux – how do you do it? Diversity of country
experiences indicates that there is more than one
way to do it.

Taiwan and Korea are extreme examples of high-risk
policy choices BUT contrast with low-risk options India, Chile, Kenya, Uganda….
Lessons (2) – from more trade openness
to more tech capability building…
 Empirical evidence – imported technology is slow
to deliver technological skills
 FDI does not flow easily to countries with weak
technological capabilities
 Technological capabilities can be acquired and
can change what you export
 Technology and trade – even more critical for
developing countries today
Hi-Tech is not the ONLY path to
growth
 Today, trade patterns are indeterminate
 There are multiple paths to leapfrogging for natural
resource and primary product exporters
 Exports of manufactured prodcuts – low, medium and hi
tech – are only ONE path
 For Sub-Saharan Africa – large range of opportunities –
evidence?
 Uganda – Nile Perch -30% of total exports; Kenya – cut
flowers – 3rd. Largest in world.