Transcript Chapter 17 - McGraw Hill Higher Education

Chapter 17
Structural change
Manufacturing
Services
Primary sector
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Lecture Plan
• Main concepts
• Structural reforms
• Non-structural reforms
• Reasons for structural changes
• Structural change in Australia
• Manufacturing structural change
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Australia’s GDP by Sector, 1965,
2001, %
70
60
50
40
%
30
20
10
0
1965
2001
Agriculture
Manufacturing
Other
Industry
Services
9
4
26
13
39
26
51
70
Source: Compiled from World Bank, World Development Report, 1992 and 2003.
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Main Concepts
• Structural change: a shift in the pattern of
production in the economy, resulting in
improvements in the production level and
productivity
• Structural policy: measures taken at the
microeconomic level to improve the economic
performance
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Structural Reforms
• Those changes to the environment of decision
making that induce decisions leading to greater
efficiency
• Changes to the regulatory environment
–
–
The amount of allowed market competition
Level of tariffs and quotas etc.
• Changes to incentives
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Non-structural Reforms
• Those that do not alter the decision-making
environment or incentives
–
–
–
Efficiency drives in the railways or water authorities
Plans to reduce manning levels on the waterfront
Industry plans for motor vehicles and textiles (these
would include some structural elements too)
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PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Reasons for Structural Changes
• Technological change
• Overall economic performance
–
–
–
GDP per head
Aggregate productivity
External sector performance
• Information and analysis
• International factors (e.g. successful reforms in
other countries)
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PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Changes in labour productivity in the
business sector, 1975 to 2002, % p.a.
Country
1975-1985 1986-1991 1991-1996 1997-2002
Australia
1.9
0.4
2.2
2.1
United States
1.2
1.0
1.4
2.3
Canada
2.8
2.1
1.6
1.7
European
Union
2.4
1.9
2.0
1.2
New Zealand
0.7
1.1
0.2
1.5
Switzerland
0.9
–1.0
–0.1
0.9
South Korea
5.5
6.1
5.3
4.0
OECD
2.1
1.7
1.7
1.8
Source: Adapted from OECD Economic Outlook, June 2003, no. 73.
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
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Structural Change in Australia
• Protection
• Microeconomic reform
–
–
–
–
–
Competition policy
Communication services
Government business enterprises (e.g. privatisation or
corporatisation)
Taxation reform
Labour market reforms
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
17-9
200
100 000
180
160
90 000
80 000
140
70 000
120
100
60 000
50 000
80
40 000
60
30 000
40
20
20 000
10 000
0
$A/employee
Index
output/employment (1975 = 100)
Australian Manufacturing: Indexes of
Output and Employment, $/employee
Real Output
Employment
A$/person
0
1975 1985 1990 1995 2002
Source: Compiled from data in Australia Productivity Commission, Trends in Australian Manufacturing, August 2003.
Copyright  2005 McGraw-Hill Australia Pty Ltd
PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser
17-10