Structural Change in Ghana 1960 -2010 9/ 20/ 2013 Robert Da rko Osei - PowerPoint PPT Presentation

1 Structural Change in Ghana 1960 -2010 9/ 20/ 2013 Robert Da rko Osei and Rem i Jedw ab

2 9/ 20/ 2013 Outline • Introduction • Patterns of Economic Development in Ghana • Methodology • Discussion of Results • Conclusions

3 9/ 20/ 2013 Introduction

4 9/ 20/ 2013 Introduction • Standard structural transformation models distinguish between labour push and labour pull (Alvarez-Cuadrado and Poshcke, 2011)  ‘Labour pull’ – industrial revolution attracts underemployed labour to the modern sector  ‘Labour push’ – a green revolution surplus labour is released for the modern sector • So  No matter the origin of the structural change, the move of labour is from ▫ low productivity to high productivity

5 9/ 20/ 2013 • In this paper we address the following questions  Has Ghana’s economic structure changed over the last half century?  What has been the nature of the change?  What is the changing structure ‘growth enhancing’?

6 9/ 20/ 2013 Patterns of Development in Ghana

Per Capita GDP (cst 2000 US $, WDI) 400 Turning points? 1974, 1983, 2001 (other possible turning points 1966, and 1978) Match quite well the census years (1960, 1970, 1984, 2000, 2010) 350 300 250 200 Akuffo (1978-79) Limann (1979-81) Nkrumah NLC Busia Acheampong Rawlings Kufuor A.M. 150 1961 1971 1981 1991 2001 1965 1967 1973 1975 1977 1985 1987 1995 1997 2005 2007 1960 1962 1963 1964 1966 1968 1969 1970 1972 1974 1976 1978 1979 1980 1982 1983 1984 1986 1988 1989 1990 1992 1993 1994 1996 1998 1999 2000 2002 2003 2004 2006 2008 2009 2010

9/ 20/ 2013 8 Changing composition: 1960-2010 • For Agriculture: share in GDP + empl’t share = productivity changes ?? • For Industry: No change in GDP and employment share = no change in productivity ?? • For Services: share in GDP + some change in employment share = increase productivity

9/ 20/ 2013 9 Changing composition: 1960-2010 • For Agriculture, cocoa has been part of the decline in GDP share • For industry, construction picked up a bit, but manufacturing has not changed since 1960 • For services, big increases in TSC, followed by govt and CSP

10 9/ 20/ 2013 S ectoral GDP per capita (cst. 2000 $) 350 300 250 200 Agriculture Industry Services 150 All 100 50 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

11 9/ 20/ 2013 Main Commodity Exports

9/ 20/ 2013 12 Trends in Ghana’s Economic complexity index 0 -0.2 -0.4 -0.6 -0.8 Axis Title -1 -1.2 -1.4 -1.6 -1.8 -2 ECI

13 9/ 20/ 2013 Methodology

14 9/ 20/ 2013 Methodology • The analysis follows McMillan and Rodrik (2011)  We express per capita GDP as follows L GDP = × t t PCGDP ( 1 ) t POP L t t Labour productivity Activity rate • In this way, per capita GDP can be driven from either of these components  In the case of Ghana, the activity rate has not changed by much over the period PCGDP has been driven by labour productivity

15 9/ 20/ 2013 Methodology contd…  Now we can decompose the labour productivity component as follows 1 ∑ ∑ δ = − = θ × − + θ − θ × P P P ( P P ) ( ) P (2) − − − − t t t j , t 1 j , t j , t 1 j , t j , t 1 j , t j j Weighted average of within sector Productivity effect of labour productivity growth – ‘ within ’ reallocations across different sectors – component (weights are the this is the ‘ structural change ’ term sectoral employment shares at start of period) - Here productivity change comes from capital accumulation or technological changes

16 9/ 20/ 2013 Methodology contd… • Based on the decomposition here, we can address the question  What are the respective contribution of the w ithin structura l cha ng e components • We use sectoral data from the WDI from 1960 to 2010 • However employment data is only available for 1960, 1970, 1984, 1992, 2000, 2006 and 2010

17 9/ 20/ 2013 Results

18 9/ 20/ 2013 Sectoral labour Productivity, 2005-06 (2000 PPP US$) McMillan and Rodrik, 20 11 Ghana World Av lab World min Ratio: Sector Rank Prod Lab Prod Rank lab Prod World av: Gh 1 154,658 3,652 5 4,309 35.9 Mining and Quarrying 2 146,218 6,345 1 16,980 8.6 Public Utilities Finance Insurance, Real Estates and bus 3 62,184 9,301 2 9,919 6.3 services 4 46,421 6,671 4 4,360 10.6 Transport Storage and Com m 5 38,503 2,401 9 1,9 8 0 19.4 Manufacturing 6 24,462 2,124 3 6,912 3.5 Construction Wholesale Retail Trade, Hotels and 7 22,635 1,507 6 3,780 6.0 restuarants Com m unity Social Personal and Govt 8 20,534 264 7 2,685 7.6 Services 9 17,530 521 8 2,254 7.8 Agriculture Hunting, Forestry and Fishing 27,746 1,354 2,851 9.7 Whole Econom y • Economy-wide labour productivity is about 10 tim es lower than the world average • Across all sectors labour productivity is lower for Ghana • Public utilities is most productive ?? • Manufacturing is the least productive = agric m ore productive !!

19 9/ 20/ 2013 Decomposed Productivity Growth, Ghana 1960-2010 (9 S ectors) Labour Productivity Com ponent of annual growth (%) due to: At start Year Growth Within Structural Within Structural 20 0 0 PPP US$ annual % 9 Sectors 9 sectors 15 sectors 15 sectors 1960-1970 2,622 0.8 0.5 0.3 0.5 0.3 1970-1984 2,850 -3.8 -3.6 -0.2 -3.8 0 1984-1992 1,651 2.5 3.2 -0.7 4.2 -1.7 1992-2000 2,017 1 -0.9 2 -1.8 2.9 2000-2006 2,190 4.5 6 -1.5 6.1 -1.7 2006-2010 2,851 2.7 0 2.6 -0.5 3.2 1960-2010 2,622 0.4 0.2 0.2 0.1 0.3 1992-2010 2,017 3 1.9 1.1 1.4 1.6 • Productivity in Ghana is generally low but it seems to have picked up in the last decade • Before 1992, productivity growth was mainly due to within sector changes but structural change component has become more important after that period with growth driven by 7 sectors (food, cocoa, construction, mining, tourism, finance and business and government services)

20 9/ 20/ 2013 Is labour moving to productive sectors 1970-1984 • Negative relationship observed for this period: Change in employment share is highest for agriculture which also had the highest employment share in 1970

21 9/ 20/ 2013 Is labour moving to productive sectors 1992-2000 • We find a positive relationship here – high productivity sectors seem to have experiences +ve change in employment share

22 9/ 20/ 2013 Concluding Remarks

23 9/ 20/ 2013 Concluding comments • The results for Ghana are not entirely optimistic ▫ But there are some pluses  Increased productivity growth after 1992 with the structural component being mostly positive ▫ And some negatives  If we take account of the growth collapse in the 1980s, then the productivity changes were not that high  The economy has experienced some structural change without industrialisation and/ or green revolution ▫ There remains inherent structural difficulties which could be very challenging for any major labour push or labour pull type structural change (e.g human capital may restrict sectoral m obility ; policy coordination plus high labour costs constrains competitiveness)

24 9/ 20/ 2013 THANK YOU