Which factors shape the relationship between manufacturing and government wages?
Benedicta Marzinotto, Alessandro Turrini 05 September 2014
The link between public- and private-sector compensation has important implications for the labour market and price competitiveness. This column reports that manufacturing and government wages co-move both in the long and short run, but that the long-run co-movement is much stronger where the government is an important employer. This co-movement tends to break down during fiscal consolidation periods, except in large-government countries. Moreover, manufacturing wages exhibit a stronger co-movement with productivity in countries where government wages are set via collective bargaining.
During the crisis, numerous Eurozone countries have introduced public wage freezes or cuts as part of an attempt to contain rising fiscal deficits and debts. Some of these countries also had to rebalance their economies, and improve price competitiveness. The relevant question is therefore whether government wages, whilst relevant for fiscal outcomes, may also exert some impact on private-sector labour costs and price competitiveness.
wages, government, public-sector pay, collective bargaining, manufacturing, Public sector, private sector, competitiveness
The US manufacturing recovery: Uptick or renaissance?
Oya Celasun, Gabriel Di Bella, Tim Mahedy, Chris Papageorgiou 24 February 2014
The strong rebound of manufacturing production following the Great Recession of 2008–09 has generated renewed interest in the sector among analysts and policymakers. This column argues that a detailed look at the data suggests that claims of a US manufacturing renaissance are unwarranted. Yet, there remain factors that could support a greater contribution from the manufacturing sector to overall US growth in the years ahead.
Amid increasing anecdotes of a ‘renaissance’ in US manufacturing, many commentators have argued that the sector may contribute more significantly to domestic GDP and global industrial output in future (e.g. Financial Times 2012, New York Times 2012, McKinsey Global Institute 2012, Citi Research 2013).
US, growth, manufacturing, Great Recession
Trade and innovation in services
Leonardo Iacovone, Aaditya Mattoo, Andrés Zahler 15 September 2013
Service exports and innovation may be a source of dynamic growth for countries in the middle-income trap. This column presents new research showing some support for this optimistic view. That said, it’s clear that researchers need to improve their understanding of how firms in the services sector innovate and increase productivity, and whether better-tailored policies can promote trade and innovation in services.
The literature on innovation and international trade has, until recently, focused almost exclusively on the manufacturing sector. This is not surprising because the bulk of international trade has been in manufactured products and innovation has traditionally been associated with new or improved physical products. The services sector was ignored because it was seen as largely untouched by both trade and innovation.
Development Productivity and Innovation
Making a future for manufacturing in advanced economies
Richard Dobbs 08 February 2013
Surprisingly, manufacturing in some advanced economies is experiencing something of a renaissance. This column argues that the renaissance will unfold in new, unexpected ways. Manufacturing value added will continue to rise, but the impact on jobs will be muted – particularly for the unskilled. A range of innovations has opened a once-in-a-generation opportunity to build new platforms, but better skills and new strategies will be needed.
After years of despair about the decline of manufacturing, policymakers in advanced economies now are talking about a rosier future. Wages have risen quickly in coastal China and other offshore locations, and have stagnated or fallen in advanced economies. Severe weather events, such as the Japanese tsunami and Bangkok floods, have exposed the fragility of global supply chains. And news that some US companies will build computers and washing machines once again in North America is offered as proof that the tide has turned (Henion and Schoenherr 2012).
Industrial organisation Productivity and Innovation
manufacturing, value added
Spatial disparities in India: Have Mumbai and Chennai become too congested?
Klaus Desmet, Ejaz Ghani, Stephen D O'Connell, Esteban Rossi-Hansberg 13 June 2012
Will India’s rapid growth in the services sector lead to overcrowding of its cities? This column compares India’s experience to that of other countries.
In the last two decades the Indian economy has been growing at unprecedented rates, but that development has led to widening spatial disparities. While some cities such as Hyderabad have become major high-tech hubs with world-class companies and real estate developments reminiscent of Silicon Valley, many other places remain mired in poverty and stagnation.
Development Industrial organisation Productivity and Innovation
India, manufacturing, services, Mumbai, Chennai
Are China and India converging?
Ejaz Ghani 23 January 2012
Mention China and India to economists and their first thought will be rapid growth. Their second thought might be how differently the two economies are achieving this: China through manufacturing, India through services. This column asks whether that stereotype may be changing.
Both China and India have attracted global attention for rapid growth, but their growth patterns are very different (Rajan 2006, Pack 2008, Bosworth and Maertens 2010). China took the conventional route of manufacturing-led growth and is recognised as a global leader in manufactured exports. India followed the unconventional route of service-led growth and has acquired a global reputation for service exports. Are their growth patterns converging? Is China catching up in services? Is India catching up in manufacturing? Or has hysteresis kept their growth patterns different?
Development International trade
China, India, manufacturing, services
Has production become more fragmented? International vs domestic perspectives
Thibault Fally 10 January 2012
As the oft-cited iPhone example illustrates, production has become increasingly fragmented across countries. This column presents recent research, however, suggesting that this trend may be reversing for manufacturing plants in the US. It shows that intermediate goods account for a decreasing fraction of output value, while industries that are closer to the final consumer contribute to an increasing share of GDP.
Production seems more complex and fragmented today than ever before. For instance, airplanes are made of zillions of parts involving many suppliers from various countries (see eg www.newairplane.com). It has also become difficult to keep track of the production of relatively more simple goods such as the Barbie doll (Feenstra 1998) or the iPhone (see Xing 2011 on this site).
US, manufacturing, iPhone
Manufacturing is special
Dani Rodrik 09 November 2011
Poor countries have access to world markets and rich countries’ technologies. In principle, they should catch up. Yet the record belies this expectation. But this column argues labour productivity in manufacturing displays a clear tendency towards convergence, unconditional on the countries’ institutions or policies. The policies that matter for growth are thus those that bear on the reallocation of labour from nonconvergence to convergence activities.
Poor countries have access to world markets, off-the-shelf technologies developed by others, and rich countries’ savings. So in principle, they should develop rapidly – more rapidly than advanced economies, which are already at the technological frontier. Yet the historical record belies this expectation. Economic convergence depends in practice on a whole host of policy, institutional, and geographic determinants, the nature of which remains vigorously debated (Acemoglu 2009).
Industrial organisation Productivity and Innovation
growth, productivity, manufacturing, convergence
Immigration, offshoring and US jobs
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C Wright 18 November 2010
Manufacturing production and employment in the US has been in decline over recent decades, often with the finger pointed at immigration and globalisation. This column presents evidence from the US between 2000 and 2007 to show that immigrant and native workers are more likely to compete against offshoring than against each other. Moreover, offshoring's productivity gains can spur greater demand for native workers.
Manufacturing production and employment in the US has been in decline over recent decades. This loss of jobs is often blamed on a combination of multinational firms relocating jobs abroad and immigrant workers increasing competition in the labour market. But measuring the impact of globalisation on jobs is more difficult than that, even if many choose not to believe it.
International trade Migration
US, unemployment, immigration, manufacturing, offshoring
Can the US manufacture employment through exports?
Michael J Ferrantino, Danielle Trachtenberg, Alison Weingarden 05 August 2010
Can increasing US exports create US jobs? Manufactures dominate US exports, but US manufacturing employment is declining. This column suggests that increased US exports are unlikely to lead to dramatic manufacturing employment gains, but employment in related services sectors may improve.
The US economy has shifted from production to services. The Dow Jones index, which was formerly populated by companies like US Steel and Amalgamated Copper, is now composed of companies like Citigroup, Microsoft, and Wal-Mart. Last year the manufacturing sector accounted for 11% of US GDP, whereas finance, insurance, and real estate alone accounted for roughly 20% (BEA 2009a).
Exports are one place where this structural change is less evident. Manufactured goods make up more than half the value of all US exports, and over 80% of goods exports are manufacturing exports.
International trade Labour markets
US, Labour Markets, manufacturing, international trade, exports