Publication: What Explains Latin America's Low Share of Industrial Employment?
Loading...
Files in English
2,709 downloads
Published
2019-03
ISSN
Date
2019-03-27
Author(s)
Editor(s)
Abstract
This paper investigates the relative importance of different channels in explaining the low share of industrial employment in Latin America relative to the economies that employ a large share of the workforce in industry. Differences in domestic final consumption shares play a pivotal role and can account for 50-70 percent of the industrial share gap. The paper finds limited support for the comparative advantage hypothesis, as differences in trading patterns account for less than 15 percent of the gap. More important are the differences in sectoral linkages and wage gaps which account for more than 30 percent of the industrial employment gap individually.
Link to Data Set
Citation
“Sinha, Rishabh. 2019. What Explains Latin America's Low Share of Industrial Employment?. Policy Research Working Paper;No. 8791. © World Bank. http://hdl.handle.net/10986/31450 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Intergenerational Income Mobility around the World(Washington, DC: World Bank, 2025-07-09)This paper introduces a new global database with estimates of intergenerational income mobility for 87 countries, covering 84 percent of the world’s population. This marks a notable expansion of the cross-country evidence base on income mobility, particularly among low- and middle-income countries. The estimates indicate that the negative association between income mobility and inequality (known as the Great Gatsby Curve) continues to hold across this wider range of countries. The database also reveals a positive association between income mobility and national income per capita, suggesting that countries achieve higher levels of intergenerational mobility as they grow richer.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Investing in Human Capital During Wartime: Experimental Evidence from Ukraine(Washington, DC: World Bank, 2025-09-02)This paper provides insights into human capital investments during wartime by presenting evidence from three experiments of an online tutoring program for Ukrainian students amid Russia’s invasion of Ukraine. Conducted between early 2023 and mid-2024, the experiments reached nearly 10,000 students across all regions of Ukraine. The program offered three hours per week of small-group tutoring in math and Ukrainian language over six weeks and used academic and psychosocial tools to address student challenges at different intensities of disruption. Results show that the program led to substantial improvements in learning—up to 0.49 standard deviations in math and 0.40 standard deviations in Ukrainian language—and consistent reductions in stress—up to 0.12 standard deviations. High take-up and engagement rates were observed, and four mechanisms were identified as drivers of impact: structured peer interactions, improved attitudes toward learning, enhanced socio-emotional skills, and increased student investments. A complementary experiment using information nudges to increase parental engagement highlights challenges in promoting parental investments in a conflict setting. The program was cost-effective across all experiments, with benefit-to-cost ratios ranging from 31 to 56, and scalable given its reliance on existing infrastructure and teaching capacity.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Children in Monetary Poor Households: Global, Regional, and Select National Trends in the Progress against Child Poverty(Washington, DC: World Bank, 2025-09-05)This paper presents the first estimates of extreme child poverty and child poverty using the World Bank’s recently revised international poverty lines. Using the international poverty line of $3.00 per day and the higher $8.30 per day poverty line (both expressed in 2021 purchasing power parity), the paper provides new results of the global and regional trends over 2014–24. The estimates show that 19.2 percent of children, approximately 412 million children, were living on less than $3.00 (2021 PPP) per day as of 2024, a reduction from 507 million children in 2014. This long-term decrease was slower than that for the general population. At the higher line of $8.30, the child poverty rate in 2024 was 65.9 percent, representing around 1.4 billion children, a drop from the 73.1 percent registered in 2014. At the regional level, the East Asia and Pacific and South Asia regions witnessed significant reductions in child poverty and extreme child poverty between 2014 and 2024, and the Europe and Central Asia and Latin America and the Caribbean regions showed reductions mostly in child poverty. In the same period, there was an increase in extreme child poverty in the Middle East and North Africa region. Sub-Saharan Africa experienced a “lost decade” of child poverty reduction between 2014 and 2024, increasing its concentration of global poverty. In 2024, Sub-Saharan Africa hosted more than three-quarters of children in extreme poor households (more than 311 million children), although its share of the global child population was around 23 percent. Country-level results show evidence of regional heterogeneity in progress against extreme child poverty.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Central America’s Deindustrialization(World Bank, Washington, DC, 2022-10)The paper assembles and harmonizes sectoral data from several sources to study the industrial trends in six Central American economies. The industrial employment share contracted by 2.5 percentage points on average over the past two decades. This deindustrialization was not trade-driven in which economies substitute domestic production of industrial goods via cheaper imports. Instead, an increase in barriers restricting the efficient flow of labor across sectors drives this decline. Adopting policies that target such barriers can potentially deliver considerable industrial expansion. But the economic impact of this policy is likely to be marginal, with aggregate output increasing by 3 percent or less if barriers are eliminated. At the same time, this approach also carries several risks, and rather than reining in inefficiency might introduce new distortions making the economy more inefficient. Perhaps a more prudent growth strategy will be to concentrate on boosting productivity, which, although challenging, has a direct effect on output.Publication What's New in the New Industrial Policy in Latin America?(World Bank, Washington, DC, 2012-09)Latin America was an aggressive practitioner of industrial policies (IP) in the years 1950-1980. During much of the period the general practice was in line with the then mainstream thinking in development economics. Significant growth, industrialization and modernization took place, but serious flaws in concept and execution of the IP caused them to fail as a vehicle for economic catch-up with rich countries in an era of an expansive world economy. A very serious Latin American external debt crisis in the 1980s, coupled with the ascendance in international discourse of arguments for retrenchment of the State in economics and life, contributed to a pendulum swing in the region to the policies of the so-called Washington Consensus. Major structural adjustments and reforms designed to bring the free market forward and push back the market governance of the State dominated the 1980s and 1990s. In recent years, however, countries in Latin America have witnessed a renaissance in the deployment of systematic IP. This paper explains why IP have emerged and why they are a necessary step for the more profound structural change needed to drive sustained high rates of growth. Based on illustrated cases which we think reflect the current state of affairs in the region, the paper highlights the nature of the shift to a more proactive state promotion of industrial and services upgrading, as well as the important new characteristics of the current outbreak of IP which are different from the ones of the past and offer hope for greater success. It also identifies a legacy of some bad habits which linger and need to be addressed with urgency if the new trend is to be successfully consolidated.Publication What Explains Big Gender Disparities in India? Local Industrial Structures and Female Entrepreneurship(World Bank, Washington, DC, 2012-10)Despite rapid economic growth, gender disparities in women's economic participation have remained deep and persistent in India. What explains these huge gender disparities? Is it poor infrastructure, limited education, and gender composition of the labor force and industries? Or is it deficiencies in social and business networks and a low share of incumbent female entrepreneurs?This paper analyzes the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. Good infrastructure and education predict higher female entry shares. There are strong agglomeration economies in both manufacturing and services, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (similar labor needs, input-output markets) predicts greater relative female entry rates. Gender networks thus clearly matter for women's economic participation. However, there is a need to develop a better understanding of how gender networks influence aggregate efficiency. There is no doubt that gender empowerment can be the escalator to realizing human potential and for creating a robust platform for growth and job creation.Publication Sectoral Productivity Gaps and Aggregate Productivity(World Bank, Washington, DC, 2016-06)This paper examines the role of changes in sectoral productivity gaps over time in accounting for growth realized by countries over the past few decades. To quantify the productivity impact of the sectoral gaps, a simple model of resource allocation is developed in which the gaps arise due to distortions in the form of asymmetrical taxes across sectors. The paper finds a limited role of changes in distortions over time in accounting for actual growth. Implied growth from changes in distortions accounts for less than 2.5 percent of actual growth for the median country. To check if the lower contribution of changes in distortions is because of unrealized gains suggested by high levels of present distortions, productivity gains are estimated when distortions across countries are reduced to the US levels. Barring a couple of cases, the gains in aggregate productivity are modest across the sample of countries.Publication The Labor Market Story Behind Latin America's Transformation(Washington, DC, 2012-10)After a robust recovery following the global crisis, Latin American and the Caribbean (LAC) has entered into a phase of lower growth dynamics: economic activity in the region is expected to expand by about 3 percent in 2012, after having grown at 4 percent in 2011 and 6 percent in 2010. This deceleration is not specific to LAC but is part of a global slowdown. World growth is indeed declining sharply, from 4.5 percent in 2011 to about 2.3 percent in 2012. Notably, the slowdown in middle-income regions has taken place in a highly synchronized manner: growth rates in LAC, Eastern Europe and South East Asia have fallen by a very similar magnitude (about 3 percentage points) between 2010 and 2012. While this synchronization reflects exogenous (global) forces the spillover to emerging markets of weaker activity in the world's growth poles, particularly Europe and China it also reflects endogenous (internal) dynamics, particularly the fact that many Middle Income Countries (MIC) had already reached in 2010-2011 the peak of their own business cycles. This synchronicity notwithstanding, the 2012 growth forecasts for individual countries in LAC are significantly heterogeneous, reflecting complex interactions between external and country-specific factors. The first chapter, which is shorter, concerns the economic juncture and growth prospects. The second chapter, which is longer and more substantive, deals with selected labor issues from both the structural and cyclical viewpoints.
Users also downloaded
Showing related downloaded files
Publication Sectoral Productivity Gaps and Aggregate Productivity(World Bank, Washington, DC, 2016-06)This paper examines the role of changes in sectoral productivity gaps over time in accounting for growth realized by countries over the past few decades. To quantify the productivity impact of the sectoral gaps, a simple model of resource allocation is developed in which the gaps arise due to distortions in the form of asymmetrical taxes across sectors. The paper finds a limited role of changes in distortions over time in accounting for actual growth. Implied growth from changes in distortions accounts for less than 2.5 percent of actual growth for the median country. To check if the lower contribution of changes in distortions is because of unrealized gains suggested by high levels of present distortions, productivity gains are estimated when distortions across countries are reduced to the US levels. Barring a couple of cases, the gains in aggregate productivity are modest across the sample of countries.Publication Talent Allocation and Post-Reform Growth in Central America(World Bank, Washington, DC, 2020-09)This paper examines the post-reform economic growth in three Central American economies -- Costa Rica, El Salvador, and Panama. From 1995 to 2015, each economy witnessed phenomenal shifts in labor market participation and occupational distribution of women. If the innate talent for a job did not change differently across genders, the occupational changes suggest that many talented women in the mid-1990s were in professions that did not conform to their comparative advantage. The paper studies the evolution of the occupational distribution using a model of occupational choice in which three forces create frictions to efficient allocation -- discrimination in labor markets, obstacles to human capital accumulation, and preferences (or social norms). The analysis shows that the underlying improvement in talent allocation over the past two decades had a quantitative impact on growth in Costa Rica and Panama. Decomposing the aggregate effects reveals that the gains were driven by declines in obstacles to human capital accumulation. In contrast, shifts in labor market discrimination created headwinds for expansion. The aggregate effects in El Salvador are relatively mild and noisy to the extent that the qualitative effect is difficult to pin down. Nonetheless, the analysis finds that the preference for market work has increased sharply in El Salvador for both genders and has proved to be a drag on growth.Publication Long-Term Growth Scenarios for Bangladesh(World Bank, Washington, DC, 2017-01)Bangladesh has achieved robust economic growth over the past 10 years, with real GDP growing by more than 6 percent on average each year. This paper investigates whether the country will be able to maintain such high levels of growth going forward. A simple growth model calibrated to the Bangladesh economy is used to analyze various growth scenarios. The main finding of the paper is that it is crucial for the country to focus on reforms to raise total factor productivity (TFP) growth, to sustain the high real GDP growth seen in the recent past. The country will fail to achieve high growth in absence of strong TFP growth despite meeting the levels of investment as outlined in the Seventh Five Year Plan. The model is also used to gain insights on government debt sustainability given different growth scenarios. The analysis highlights the significance of meeting revenue targets in maintaining sustainability, considering the planned expansion in expenditures.Publication Crop Yield Convergence across Districts in India's Poorest State(World Bank, Washington, DC, 2020-07)Bihar, India's poorest state, witnessed impressive yield growth in each of its three principal crops over 2005-17. This paper examines whether a convergence in district yields accompanied the improvement in yields at the state level, thereby reducing regional inequalities in land productivity. The convergence test allows the idiosyncratic element of productivity to be time-varying, thus allowing yields to diverge in some interim phases. Rice yields across districts appear to be converging to a common level, while maize yields have diverged over the same period. However, the sub-period analysis shows a trend of divergence for both crops going forward. In contrast, wheat yields seem to be converging to a common level recently, although the convergence for the entire period is weak. The analysis also identifies district clubs, which are converging to similar steady states. The club classification transcends agro-climatic boundaries, indicating a need for policy action to aid yield growth in lagging districts. Finally, there is no evidence that the divergence in yields was driven by a divergence in credit allocation, highlighting the limitations of a macro credit-driven policy. Credit supply might not be enough when there are structural snags in the availability of direct agricultural inputs.