Increasing Productivity Growth in Middle Income Countries

Abstract

Many small middle-income countries (SMICs) in sub-Saharan Africa (SSA) have experienced a moderation in growth in recent years. Although factor accumulation, most notably capital deepening, was crucial to the success of many SMICs historically, this growth model appears to have run its course. The analysis in this paper suggests that the decline in the contribution of total factor productivity (TFP) to growth is largely responsible for the slowdown in trend growth in many SMICs, which highlights the need for policy actions to reinvigorate productivity growth. This paper explores the question of what kind of structural policies could boost productivity growth in SMICs and the political economy factors that may be contributing to the slow implementation of these critical reforms in these countries. The findings suggest that although macroeconomic stability and trade openness are necessary for productivity growth, they are not sufficient. SMICs need to improve the quality of their public spending, most notably on education to minimize the skill mismatch in the labor market, reduce the regulatory burden on firms, improve access to finance by small and medium-sized enterprises and create the enabling environment to facilitate structural transformation in these economies.

Assessing Economic Growth Quality

“…That is, the nominal GDP, encompassing price changes, and thereby affecting the behavior of consumers and entrepreneurs, as well as other economic entities and phenomena, describes the changes in economic reality. But on the other hand, the relationship between inflation and productivity growth is found to be negative in cross-country empirical studies (Abdychev et al, 2015), and incomes of the population are negatively affected by inflation as well (Leonidova, 2019), which leads to a violation of qualitative characteristics of growth in the processes of its formation and manifestation. Another study suggests that before reaching some threshold level, inflation has a positive impact on growth (Malik et al, 2021).…”

Determinants of Export Competitiveness of Agricultural Products in Malaysia

“…Thus, they concluded that the rise in the labour participation rate would initiate competitiveness and economic growth. Alternatively, Abdychev et al (2014) pointed out a negative influence of labour participation rates, especially among female workers. However, the relationship turned positive after adjusting the share of the agriculture sector to the GDP, and this illustrated that most women were involved in low-end productivity in the agriculture sector.…”

Transition Finance

“…For example, in the late 1980s, transition has referred to the transformation efforts made by former Soviet Union members to move from centrally planned to market economies. More recently, green transition referred to "fostering economic growth and development, while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies" (see OECD Green Growth and Sustainable Development 4 ).…”