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

Structural Change in Ghana 1960 -2010

Robert Da rko Osei and Rem i Jedw ab

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Outline

• Introduction
• Patterns of Economic Development in Ghana
• Methodology
• Discussion of Results
• Conclusions

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Introduction

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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

• f labour is from

▫ low productivity to high productivity

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• 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’?

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Patterns of Development in Ghana

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Per Capita GDP (cst 2000 US $, WDI)

150 200 250 300 350 400 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Nkrumah NLC Busia Acheampong Rawlings Kufuor A.M.

Akuffo (1978-79) Limann (1979-81)

Turning points? 1974, 1983, 2001 (other possible turning points 1966, and 1978) Match quite well the census years (1960, 1970, 1984, 2000, 2010)

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

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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

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S ectoral GDP per capita (cst. 2000 $)

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50 100 150 200 250 300 350 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Agriculture Industry Services All

Main Commodity Exports

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Trends in Ghana’s Economic complexity index

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• 2
• 1.8
• 1.6
• 1.4
• 1.2
• 1
• 0.8
• 0.6
• 0.4
• 0.2

Axis Title ECI

Methodology

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Methodology

• The analysis follows McMillan and Rodrik (2011)

 We express per capita GDP as follows

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) ( L GDP POP L PCGDP

t t t t t

1 × =

Activity rate Labour productivity

• 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

Methodology contd…

 Now we can decompose the labour productivity component as follows

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(2) ) ( ) (

, 1 , , 1 , , 1 , 1 ∑

∑

× − + − × = − =

− − − − j j t j t j t j t j t j t j t t t

P P P P P P θ θ θ δ

Weighted average of within sector productivity growth – ‘within’ component (weights are the sectoral employment shares at start of period)

• Here productivity change comes

from capital accumulation or technological changes Productivity effect of labour reallocations across different sectors – this is the ‘structural change’ term

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

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Results

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Sectoral labour Productivity, 2005-06 (2000 PPP US$)

• 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 !!

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McMillan and Rodrik, 20 11 Ghana Sector Rank World Av lab Prod World min Lab Prod Rank lab Prod Ratio: World av: Gh Mining and Quarrying

1 154,658 3,652 5 4,309 35.9

Public Utilities

2 146,218 6,345 1 16,980 8.6

Finance Insurance, Real Estates and bus services

3 62,184 9,301 2 9,919 6.3

Transport Storage and Com m

4 46,421 6,671 4 4,360 10.6

Manufacturing

5 38,503 2,401 9 1,9 8 0 19.4

Construction

6 24,462 2,124 3 6,912 3.5

Wholesale Retail Trade, Hotels and restuarants

7 22,635 1,507 6 3,780 6.0

Com m unity Social Personal and Govt Services

8 20,534 264 7 2,685 7.6

Agriculture Hunting, Forestry and Fishing

9 17,530 521 8 2,254 7.8

Whole Econom y

27,746 1,354 2,851 9.7

Decomposed Productivity Growth, Ghana 1960-2010 (9 S ectors)

• 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)

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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

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 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

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

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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

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Concluding Remarks

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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)

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THANK YOU

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