Industrial Productivity in Developing Nations

Abstract

The heart of the economic development process is the shift in economic activity from rural to urban activity and the benefits of this shift for national productivity. This process is typically accompanied by a growth in the manufacturing sector and the sector’s increasing involvement in international trade. Jorge Katz’s early contributions to economics analysed the growth of manufacturing in a number of nations and the sources of this growth (Katz, 1968 and 1969). To those mainly familiar with his later work, his earliest research at Oxford might be surprising, as it was firmly within the neoclassical tradition of Sir John Hicks, his dissertation adviser. It deviated (slightly) from the neoclassical model by examining Verdoorn effects, which anticipated later developments in endogenous growth theory. It involved the estimation of C.E.S. (constant elasticity of substitution) production functions in which he regressed value added per worker on wage rates in order to obtain estimates of the elasticity of substitution, productivity growth and other parameters of the standard neoclassical production function. The book and article (1968) that resulted were widely cited at the time. He then embarked, almost as an act of contrition, on the opposite type of research, eschewing econometric estimation but spending large chunks of time in the micro examination of the behaviour of individual firms. Both types of research were exemplars of their genre and, interestingly, anticipate much of the ensuing research in development economics, including some of the most recent (Bloom et al., 2010).