Development strategies: middle income countries

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  • 1. Development Strategies: Middle-income countries’ challenges and answersCosta Rica,31 July 2012 Mario Pezzini DirectorOECD Development Centre
  • 2. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth: challenges and threats
  • 3. The four-speed world in the 1990s Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth
  • 4. The four-speed world in the 2000s Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth
  • 5. Shifting Wealth China India % of world GDP % of world GDP14% 14%12% 12%10% 10%8% 8%6% 6%4% 4%2% 2%0% 0% 1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010 Market Exchange Rate PPP Exchange Rate Market Exchange Rate PPP Exchange Rate
  • 6. The rise of China in global supply chainsas a dominant supplier Major trade partners for Asia’s intermediate exports in goods and services Source: OECD Input-Output Database, March 2010; IDE-JETRO Asian International Input-Output Database 2006; OECD Bilateral Trade Database, March 2010; OECD Trade in Services, January 2010.
  • 7. Shifting wealth: poverty reduction SW is moving South = less poverty
  • 8. Shifting Wealth:New resources for development Greater fiscal space in the 2000s vis-à-vis the 1990s Fiscal revenue to GDP ratio (%) Source: Authors’ calculations based on World Bank (2011)
  • 9. Shifting Wealth: New “Emerging Partners” Africa’s Trade with the Emerging Partners in 2011 US$ billion and % of Total China 19.5% • Countries outside ($171 bn) OECD DAC in 2000 Turkey 1.7% ($14.5 bn) Korea, Rep. 2.8% whose economic ($25 bn) relations with Africa have risen fast over the decade • China, India, Korea, Brazil and Turkey India 3.5% are leading the pack Brazil 3.2% ($31 bn) ($27.6 bn) Other Eps 8.8 % ($ 77.5 bn) 9
  • 10. Shifting Wealth: Industrialization Africa’s exports of manufactured products100 Billion USD EU25 80 USA 60 Other Traditional 40 Partners Other Emerging 20 Partners China 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 10
  • 11. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth: challenges and threats
  • 12. A success story?• A lower-middle income country• Average 5% annual growth rate since 1990• Nearly 100% primary enrolment in 2008• 80% health care coverage• ‘Prudent public debt management’ (42.8% of GDP in 2009)• 3% fiscal deficit• Inflation at approx. 3% in the 2000s
  • 13. Tunisia Source: OECD/AfDB/UNECA (2010), African Economic Outlook.
  • 14. Growth in life satisfaction andincome do not necessarily coincide Sources: Authors‘ calculation based on Gallup World Poll (2010) and World Bank (2010)
  • 15. Middle Income Trap Transitions from Middle-Income to Advanced-Country Levels 27 GDP/cap_PPP, at current international dollars, thousands 2004 2007 2000 2005 25 2004 2004 2004 1994 1996 1998 2005 2001 1998 1997 2008 2005 23 21 19 17 15 1987 1986 1994 1997 1989 1998 1995 1994 2000 1988 1995 1988 1993 1993 1999 1991 13 Singapore Spain Slovenia Cyprus Finland Ireland Korea Portugal Israel Iceland Hong Kong, China Czech Republic Sweden New Zealand Chinese Taipei Greece Start of transition period End of transition period Eichengreen: 2015 at $ 17,000/cap_PPP)
  • 16. •. Shifting Wealth: Smoothed Growth Smoothed annual growth rates, 1980-2010 (Hodrick-Prescott filter) 7% 6% 5% 4% 3% 2% 1% 0% 1980 1985 1990 1995 2000 2005 2010 Low income Middle income OECD members Source: DEV calculation based on WDI data
  • 17. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity
  • 18. Catching up in labour productivityKorea, 1970-2009
  • 19. Productivity:Low levels & low growth Source: OECD Development Centre
  • 20. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion
  • 21. Inequalities remain Gini coefficients before and after taxes and transfers in Latin American countries Source: OCDE (2008a) for OECD countries excluding LAC, OECD (2008b) for Argentina, Brazil Colombia and Peru.
  • 22. Labour and social cohesion:Increase in labour disputes in China 800 600 Number of Labor Dispute Cases (thousand) 400 200 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Cai and Wang (2011)
  • 23. Labour markets: Reforming labour institutions (China) Reponses: increase in minimum wages… …and wider use of collective bargaining Average minimum wage in Chinese cities Thousand Number of collective contracts (left axis) Million (1999 = 100) 1 000 Number of employees covered (right axis) 100300 900 90250 800 80 700 70200 600 60150 500 50100 400 40 300 30 50 200 20 0 100 10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0 1998 1999 2000 2001 2002 2009 Source: Authors’ calculations based on Du and Pan (2009) and CASS. Source: Cai and Wang (2011).
  • 24. Africa’s young population is growingbut jobs are not keeping up 250 1,000 Young (15-24) People, Million GDP, Billion (2005 PPP int. $) 900 200 800 700 150 600 500 100 400 300 50 200 100 0 0 Youth Population Youth Employment GDP (right axis)
  • 25. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion  Environment
  • 26. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion  Environment  Fiscal Revenue
  • 27. Tax Revenues: OECD vs LAC Total tax revenues as percentage of GDP, 1990-2009 Difference (A-B) Selected LAC¹ (A) OECD (34)² (B) 40 35 30 25 20 15 10 5 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008