chasing a moving target Stockholm, March 9, 2018 Ari Kokko - - PowerPoint PPT Presentation

Structural change and growth: chasing a moving target

Stockholm, March 9, 2018

Ari Kokko

Copenhagen Business School and School of Business, Economics, and Law, Gothenburg University

Introduction

• Many fields of research have studied structural

change and transformation

– My entry points: development economics and international economics – Others have chosen other entry points: economic geography, macroeconomics, growth theory, innovation, technology policy, labor etc etc

• Multiple objectives: to understand processes in
• rder to identify impacts and to influence

patterns of development

• Today’s talk: how has my understanding of

structural transformation and its policy space changed over time?

Starting point

• Development economics

– Development is structural change. Need to support transformation from primary to secondary and tertiary sectors with higher value added and better growth prospects

• International economics

– International trade and FDI change economic

• structure. Specialization according to comparative

advantages transforms economies

Illustration: The Lewis Turning Point

Illustration: International Trade

Akamatsu’s Flying Geese Model

Illustration: Impact of FDI

Consequences and policies

• Trade and FDI beneficial for all parties involved in

the game

– Although some will benefit more than others

• “Simple” policy prescriptions

– Investment, urbanization, and trade policy to promote development (with mix of import substitution and export orientation depending on preferences) – Trade policy and classical industrial policy to influence patterns of export competitiveness – Openness to FDI, both inward and outward

However, global value chains change the game. Industries may stay even if activities move.

Main industries Time

Japan 1950s Japan 1960s Japan 1970s Japan 1980s Japan 1990s

Structural Transformation in Japan New Version

Industries stay but activities move

When value chains are deconstructed

• Continuous reconfiguration of activities within

enterprises and industries

– Specialization and servicification – Outsourcing and offshoring – Shift in focus from individual industry or product category to value chains, clusters, and development blocks

• Standard indicators of economic structure

may miss out on change processes

– Example: Swedish MNCs

Illustration: Changes in the population of plants

• wned by Swedish MNCs 1986-1994

Fors & Kokko (2000)

Shift in focus from industry to activity

• What activities are kept at home? Where do we really

have our current comparative advantages?

– Look at skills, capabilities, competencies

• Why does it matter?

– Quality of current jobs, but also the quality of what we will get tomorrow – Relatedness – Regional differences within national economies: skills, capabilities, and competencies are not evenly distributed

• What is the scope of policy (and policy assessment)?

– Focus on skills, capabilities, competencies – Regional dimensions – Coordination and complementarities

Henning et al. (2016)

Illustration: Development of local labor markets in Sweden 1985-2014 (employment)

Grundskola Kort eftergymnasial Medellång eftergymnasial Lång eftergymnasial Henning et al. (2016)

Employment growth across “skill” categories, Sweden 2008-2013

Chefsyrken Fördjupad högskoleutb Högskole- kompetens Admin/ kundtjänst Service,

• msorg,

försäljning Lantbruk, skogsbruk, fiske Bygg- verksamhet Tillverkning, transport Kortare utbildning, introduktion

Henning et al. (2016)

Risk and resilience: The impact of automation on labor market groups

Henning et al. (2016)

Links between resilience and employment growth, local labor markets in Sweden, 2001-2013

Relatedness

• Where we are today matters for where we can go

/ what we can do in the future

• Ricardo Hausmann, Cesar Hidalgo et al (Harvard, MIT)

– Product Space. Products are connected if they use the same broad set of assets and are co-exported. Countries move from one set of products to the next in a predictable manner.

• Martin Henning et al (U of Gothenburg)

– Skill-relatedness. Industries are related if they use similar skills and capabilities. Skill-relatedness facilitates diversification and expansion into related industries/activities

• C. A. Hidalgo et al. Science 2007;317:482-487

The Product Space

Industry space, Sverige, 2008-2011

Henning (2014)

Individuals Firms Industries Sectors

Units of analysis changing over time

Time

Agriculture to Industry Strategic / Dynamic Industries

Clusters, Value Chains, Development Blocks

National / Regional Champions Skills, Capabilities

Individuals Firms Industries Sectors

Policy instruments changing over time

Time

Trade policy, urbanization, education, institutions Trade policy, classical Industrial policy

S&T policy, education, regional policy, policy coordination institutions

S&T policy, trade & FDI policy, competition policy, procurement, subsidies Education policy, regional policy, incentives ++

Thought experiment

• What if the main drivers of change in the coming decade

are

– Big Data – Artificial Intelligence – Digitalization / Automation / Robotization?

• What is needed for successful adjustment? At what level

should interventions be made?

– Change in industry structure?

• Increased production of hardware (computers, robots)?

– Investment in physical capital?

• More computing power)?

– Investment in human capital / skills?

• To develop technologies / solutions
• To apply technologies

Policy assessment

• Focus on individuals may simplify policy assessment

– Performance of education institutions

• Higher education
• Life-long learning

– Formal qualifications of the labor force – Employment development – Income

• But policy making may become more difficult

– Regional dimension challenges national policy – Substantial time lags between policy intervention and

• utcomes

– Analytical capability / foresight more important – Hard to see quick fixes

Selected references

• M. Henning, J. Boström Elias, J. Jakobsson och F.

Lavén (2017), Kompetenslandskapets

• mvandling mot industri 4.0 - Långsiktiga

perspektiv på kompetensbehovet inom industri

• ch industrinära tjänster i Västra Götaland, CRA

Working Paper Nr 2017:1, Handelshögskolan, Göteborgs Universitet.

• M. Henning, (2014), Branschöverskridande

kompetensknippen – Nya perspektiv på Västsveriges näringslivsstruktur, Västra Götalandsregionen och Region Halland.

• M. Henning, J. Borggren, J.Boström Elias, K.

Enflo, F. Lavén (2016), Strukturomvandling och automatisering – Konsekvenser på regionala arbetsmarknader, Västra Götalandsregionen och Region Skåne.