Manufacturing has made an important contribution to raising living standards in many parts of the world. Concerns about premature deindustrialization have made some observers skeptical about the ...potential for manufacturing to play this role in Africa. But employment in African manufacturing has grown rapidly over the past 20 years. These employment gains have been accompanied by: (i) large increases in the number of small manufacturing firms; (ii) limited employment gains in large firms; and (iii) robust labor productivity growth in Africa's large firms. Limited employment growth in Africa's large manufacturing firms is partly a result of the capital intensity of the manufacturing subsectors in which African countries are most engaged—the processing of resources—and partly a result of rising capital intensity in manufacturing. The potential for manufacturing to raise living standards in Africa depends on indirect job creation by large firms through backward and forward linkages and increasing labor productivity in small firms.
We link industry-level data on trade and offshoring with individual-level worker data from the Current Population Surveys from 1984 to 2002. We find that occupational exposure to globalization is ...associated with significant wage effects, while industry exposure has no significant impact. We present evidence that globalization has put downward pressure on worker wages through the reallocation of workers away from higher-wage manufacturing jobs into other sectors and other occupations. Using a panel of workers, we find that occupation switching due to trade led to real wage losses of 12 to 17 percentage points.
Using firm-level data collected by the U.S. Bureau of Economic Analysis, we estimate the impact on U.S. manufacturing employment of changes in foreign affiliate wages. We show that the motive for ...offshoring and, consequently, the location of offshore activity, significantly affects the impact of offshoring on parent employment. In general, offshoring to low-wage countries substitutes for domestic employment. However, for firms that do significantly different tasks at home and abroad, foreign and domestic employment are complements. These offsetting effects may be combined to show that offshoring by U.S.-based multinationals is associated with a quantitatively small decline in manufacturing employment.
The limitations of neo-classical growth models have led to a resurgence of interest in dual economy models and structural change. Structural change entails the movement of labor from low productivity ...sectors like agriculture into more modern sectors of the economy. Because the share of the labor force in agriculture is so high in most of Sub-Saharan Africa, the potential for structural change to lead to growth and poverty alleviation in Africa appears to be enormous. Yet, very little of this new literature on structural change focuses on Africa. This special issue begins to fill that gap. The first half of this special issue contains five original contributions that provide new insights with respect to the nature of Africa’s growth over the past two decades. The second half contains six original contributions that examine opportunities for structural transformation in Africa.
The sixteen essays edited and synthesized by Emmanuel Akyeampong, Robert H. Bates, Nathan Nunn, and James A. Robinson contribute significantly to our understanding of the following questions: (1) ...When did Africa become poor?; (2) Why did Africa become poor?; and (3) Why has Africa remained poor? Although these questions are impossible to answer in a definitive way, the partial explanations offered in this book are insightful and thought provoking and are summarized in this article. However, they also rest primarily on economic and political arguments. The importance of geography, which is mostly not explored in these essays, is reviewed in the final section of this article.
The 1990s dealt a blow to traditional Heckscher-Ohlin analysis of the relationship between trade and income inequality, as it became clear that rising inequality in low-income countries and other ...features of the data were inconsistent with that model. As a result, economists moved away from trade as a plausible explanation for rising income inequality. In recent years, however, a number of new mechanisms have been explored through which trade can affect (and usually increase) income inequality. These include within-industry effects due to heterogeneous firms, the effects of offshoring of tasks, effects on incomplete contracting, and the effects of labor-market frictions. A number of these mechanisms have received substantial empirical support.
Firms often cite financing constraints as one of their primary obstacles to investment. Global capital flows, by bringing in scarce capital, may ease host-country firms' financing constraints. ...However, if incoming foreign investors borrow heavily from domestic banks, multinational firms may exacerbate financing constraints by crowding host-country firms out of domestic capital markets. Combining a unique cross-country firm-level panel with time-series data on restrictions on international transactions and capital flows, we find that different measures of global flows are associated with a reduction in firm-level financing constraints. First, we show that one type of capital inflow—direct foreign investment (DFI)—is associated with a reduction in financing constraints. Second, we show that restrictions on capital account transactions negatively affect firms' financing constraints. We also show that DFI inflows are associated with lower sensitivity of investment to cash flow for firms without foreign assets and for domestically owned enterprises. Finally, the results indicate that these effects are stronger for low-income than for high-income regions.
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