Can Service Be a Growth Escalator in Low-Income Countries?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Structural Change in West Africa: A Tale of Gain and Loss

“…However, there is a growing contention that the classic path of catch-up via manufacturing-led industrialization may be inaccessible for developing countries today for a wide array of reasons. 38 The newly-emerging unorthodox view of structural change emphasizes the contribution of services (Ghani and O'Connell, 2014) and productivity increases within sectors and within firms to growth and job creation. Technological advances, the argument goes, expand the tradability of services and thus low-income countries could grow faster via exploiting their revealed comparative advantage within services.…”

Understanding the relationship between growth and employment in Nigeria

“…This has sparked the debate on whether a services-led model can deliver rapid growth and good jobs in Africa, the way that manufacturing once did. Ghani and O'Connell (2014), using historical data, established that services can indeed be a growth escalator while sceptics like Rodrik (2014) and Kormawa and Jerome (2015) posit that services can hardly deliver rapid growth and good jobs especially in developing countries since the majority are still operating at low margins and low levels of productivity.…”

Medium-term Challenges for Jobs with Equity

“…Moreover, rising incomes may have created changes in demand, shifting demand from manufacturing goods to services. However, the extent to which services can take over the role of manufacturing and facilitate the convergence of developing to developed countries is still under scrutiny (Ghani and O'Connell, 2014). A more pessimistic view emphasizes the partial non-tradability of services and the limitations of productivity gains in their production (Rodrik, 2014), suggesting that the preservation of manufacturing employment is likely to be an important ingredient for economic development of low-income countries in the future.…”