In an attempt to recuperate its dysfunctional electricity distribution system, Albania privatized its sole electricity distribution company in 2009. Disappointed with the results of the privatization, just five years later, the State of Albania renationalized the company.
The case study “Revitalizing the Albanian Electricity Sector” analyzes the key sources of inefficiencies in the electricity distribution sector in Albania and the structural problems of the current state-owned company. It explains how the tariff setting and the failed infrastructural investments triggered a chain effect of financial instability which spilled beyond the limits of the electricity sector and discusses possible reforms to the sector.
In this document we describe the size of the Poblacion Flotante of Bogota (D.C.). The Poblacion Flotante is composed by people who live outside Bogota (D.C.), but who rely on the city for performing their job. We estimate the Poblacion Flotante impact relying on a new data source provided by telecommunications operators in Colombia, which enables us to estimate how many people commute daily from every municipality of Colombia to a specic area of Bogota (D.C.). We estimate that the size of the Poblacion Flotante could represent a 5.4% increase of Bogota (D.C.)'s population. During weekdays, the commuters tend to visit the city center more.
This paper presents a descriptive analysis of wage inequality in Colombia by cities and industries and attempts to evaluate the impact of the inequality of industries on inequality of cities. Using the 2010-2014 Colombian Social Security data, we calculate the gini coefficient for cities and industries and draw comparisons between their distributions. Our results show that while cities are unequal in similar ways, industries differ widely on how unequal they can be with ginis. Moreover, industrial structure plays a significant role to determine city inequality. Industrial framework proves to be a key element in this area for researches and policymakers.
Social relations involve both face-to-face interaction as well as telecommunications. We can observe the geography of phone calls and of the mobility of cell phones in space. These two phenomena can be described as networks of connections between different points in space. We use a dataset that includes billions of phone calls made in Colombia during a six-month period. We draw the two networks and find that the call-based network resembles a higher order aggregation of the mobility network and that both are isomorphic except for a higher spatial decay coefficient of the mobility network relative to the call-based network: when we discount distance effects on the call connections with the same decay observed for mobility connections, the two networks are virtually indistinguishable.
Este documento propone un nuevo marco institucional para la implementación de políticas de desarrollo productivo (PDP) en Chiapas, con el objetivo de impulsar un cambio estructural de la economía chiapaneca en búsqueda de mayor diversidad y complejidad productiva.
La primera sección contiene un diagnóstico del contexto actual de PDP en el Estado. Se observa un bajo grado de implementación y ejecución, pese a la abundancia de análisis, prescripciones e iniciativas de apoyo a la empresa privada. Esta situación no se puede atribuir a la escasez de recursos. Aunque a nivel estatal no se dispone de muchos recursos para PDP, sí los hay al nivel de programas federales existentes. Se trata de deficiencias de coordinación y liderazgo en el sector público, que interactúan con problemas de coordinación dentro del propio sector privado, con la percepción de inestabilidad político-institucional, y con una historia de desconfianza, para conformar un escenario de escasa colaboración a distintos niveles, por lo que muchas de las oportunidades existentes quedan desaprovechadas.
La segunda sección describe los fundamentos conceptuales para un nuevo marco institucional que haga posible la implementación efectiva de PDP, reflejados en cuatro principios básicos. Primero, el nuevo marco debe construirse con relativamente pocos recursos presupuestarios del Estado. Segundo, se subraya que debe centrarse en la coordinación entre sector público y sector privado, lo que requiere capacidades y conocimientos específicos dentro del sector público, la construcción de una relación de confianza, y la promoción proactiva de la organización y coordinación del sector privado. Tercero, un énfasis en la provisión de bienes y servicios públicos, y no intervenciones de mercado. Cuarto, la promoción de un proceso dinámico iterativo.
Una vez establecidos los principios, en la tercera sección se detalla la propuesta concreta de coordinación para la implementación del nuevo marco institucional. Se centra ella en los siguientes cinco puntos. Primero, la designación de un ente implementador sobre el cual recaiga con claridad el liderazgo y la responsabilidad del proceso de implementación de PDP. Segundo, se recomienda dotar a dicho ente de un staff técnicamente competente. Tercero, debe tener autonomía política. Cuarto, debe ser proactivo, en un proceso de dinamización orientado a la acción. Por último, debe fomentar el liderazgo en el sector privado. Al final, se discuten ejemplos ilustrativos de cómo se podría dar la implementación práctica de ese proceso dinámico.
El Centro para el Desarrollo Internacional de la Universidad de Harvard (CID), la Fundación Los Grobo, y la Escuela de Alta Dirección y Administración de Empresas de Barcelona (EADA), con el apoyo de la Secretaría de Hacienda y Crédito Público del Gobierno de México, se han asociado para conducir una exploración de las actitudes y aptitudes productivas de las comunidades indígenas de Chiapas. Dado el alto grado de dispersión de estas comunidades, hemos decidido seleccionar una localidad piloto, relativamente próxima a zonas urbanas, e implementar allí la metodología del programa Potenciar Comunidades desarrollada por la Fundación Los Grobo.
Nuestro objetivo final es incrementar la comprensión de la complejidad social, política, cultural y productiva de las comunidades indígenas de Chiapas, utilizando como vehículo una metodología que promueve el diagnóstico participativo, identifica capacidades y recursos, en el proceso de diseñar un plan colectivo de desarrollo territorial. A través de la implementación piloto de Potenciar Comunidades, el equipo busca crear una base de conocimiento que permita fortalecer nuestra capacidad para diseñar e implementar políticas de desarrollo en las comunidades indígenas con una vertiente productiva, como complemento a las políticas de asistencia social que predominan en el lugar.
Chiapas is not only the lowest per capita entity in Mexico, but also the one that has grown the least during the last decade. As a result, the gap that separates it from the rest of the country has been widening significantly. This performance contrasts with the environment of relative macroeconomic and institutional stability that has prevailed during this period.
The low level of income in Chiapas is consistent with the inability of the state to produce things that it can sell beyond its limits. Its per capita exports are among the lowest in Mexico and are concentrated in a series of agricultural primary products, which are traded in highly competitive markets with very low margins.
What are the reasons behind Chiapas' poor economic performance? This document follows the growth diagnosis methodology developed by Hausmann, Rodrik and Velasco (2005), adapting it to a sub-national context. Our objective remains the same: to identify the main constraints to economic growth in Chiapas.
According to the results of our analysis, the main restrictions on the growth of the state are not found in any of the usual suspects. Low levels of education to some extent are associated with the backwardness of Chiapas, but barely enough to explain a small part of the gap. The orography and the climate of Chiapas represent a challenge for the lifting and maintenance of its infrastructure, but the latter does not appear as the main restriction to the development of its productive fabric. There is also no evidence of credit market failures. The low levels of private credit in Chiapas are more associated with the low productivity of the economic activities carried out there than with bottlenecks or insufficiencies in the supply of financing.
Our conclusion is that Chiapas is in a (low) productivity trap. Its main problem is that it has an economy of very low complexity or sophistication, which reflects its few productive capacities. Modern production systems require a number of complementary inputs that are absent in Chiapas. In this context, productive diversity and private investment are low because returns to investment are also very low. Since the demand derived from private investment is low, it inhibits the emergence of a supply of complementary inputs, giving rise to a problem of coordination similar to that of the egg and the hen. Solving this coordination problem requires state intervention. Some of the few cases of manufactured exports that exist in Chiapas have resulted from successful state interventions to coordinate the existence of inputs needed for production with the demand for them. This feature provides the supporting argument that justifies the creation of Special Economic Zones.
In Chiapas, this situation is further aggravated by the combination of three factors: (1) high government transfers, (2) lack of public transportation and (3) low educational level.
Government transfers have effects similar to those identified in the economic literature of the Dutch disease: to increase the relative costs of tradable goods by tilting economic activity to the non-tradable sectors. The absence of a public transport system directly reduces the net benefit of working in the city if you live in the countryside. Thus, a dual equilibrium has been established with significant differences between wages across the entire range of professions and occupations between cities and their nearest rural communities. Finally, although Chiapas has gradually closed the educational gap that separates it from the rest of the country, there are still significant differences. In our opinion, This gap is due to the fact that the decision to accumulate years of schooling is partly endogenous to the returns obtained from education. Seen this way, education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. Education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. Education gaps would be a mirror of the differences in terms of production methods that predominate in Chiapas, in contrast to the rest of the country. For this reason, we observe that while returns to education are higher in Chiapas, it is more profitable for each educational level to emigrate (to a place where there are other complementary inputs that make higher productivity and a higher salary possible) than to stay in work the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. For each educational level it is more profitable to emigrate (to a place where other complementary inputs exist that make possible a greater productivity and a higher salary) than to stay to work in the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination. For each educational level it is more profitable to emigrate (to a place where other complementary inputs exist that make possible a greater productivity and a higher salary) than to stay to work in the entity. Chiapas emigrants, although few, receive similar incomes to workers with the same level of education at the destination.
The policy implications of this diagnosis point to the need to take advantage of the knowledge that already exists in the greater populated centers of Chiapas and in the rest of Mexico to promote diversification towards other more complex activities that can build upon the capacities already Existing in the area. The creation of a public transport system linking the rural communities surrounding the city could solve the constraint of labor shortages, while opening up greater urban employment opportunities for the inhabitants of neighboring rural communities. This is a typical example of the egg and chicken dynamics that prevails in Chiapas, since a minimum scale of operation is required for the creation of an efficient public transport system,
Our prescription suggests that we take the mountain to Muhammad, since Muhammad has not gone to the mountain. That is to say, to try to solve the problems of coordination through an intervention that approaches the work opportunities to where the workers are, given that under the current conditions the latter do not find it profitable to get closer to where the job opportunities are. There are rural areas with low participation rates and high poverty rates in the neighborhood of San Cristóbal de las Casas. This is also a region where there is a lot of uncertainty for private economic activity, since the existence of ejido territories of community ownership predominates there. One implication of our analysis could be to create an Industrial Park around San Cristóbal, That solves the lack of public goods that has kept away the private economic activity (legal insecurity, difficulty to get land, social unrest), and at the same time bring the companies where the available labor is. The experience within Chiapas of companies like Arnecom-Yazaki indicates that with short training periods, workers could be integrated into relatively modern systems and deal productively.
This solution is a step on which we can enter a sustained development dynamic, through successive improvements in productivity derived from the transformation of production and the progressive adoption of more modern production systems. To grow, Chiapas must start by learning to do things that are already produced in the rest of Mexico and can sell out of the state. From there, the economic fabric and knowledge associated with more modern methods of production will be created, and from there gradually the export capacity can be developed and more complex activities can be developed. This process requires coordination between the different actors, government (national and regional), private sector, and academia, with the aim of proactively seeking adjacent activities,
Chiapas es el estado más pobre de México, y también el menos diversificado en su estructura productiva. Según los hallazgos de este reporte, esa dualidad no es una coincidencia casual. La escasa complejidad económica de Chiapas, medida tanto por la escasa sofisticación de sus exportaciones como por la exigua diversidad en la composición de su empleo, es uno de los factores asociados a sus bajos niveles de ingreso y escaso crecimiento. Para cambiar el patrón de crecimiento de Chiapas es necesario cambiar su estructura de producción, haciéndola más compleja y sofisticada.
Afortunadamente, existe un enorme potencial para que diferentes lugares de Chiapas se muevan de manera gradual hacia productos e industrias de mayor sofisticación, con base en el conocimiento con el que ya cuentan hoy en día. No todos los lugares tienen el mismo potencial; la diversidad de capacidades productivas que existe en México se reproduce hacia el interior de Chiapas de manera fractal. Nuestros análisis indican que la variedad de niveles de ingresos hacia adentro de las regiones sigue siendo mayor que las diferencias entre los promedios de esas regiones. Esta característica justifica la utilización de un enfoque municipal, centrado en aquellas zonas urbanas de mayor población, con suficiente diversidad y sofisticación como para justificar un análisis de productos e industrias “adyacentes” de mayor complejidad que requieran capacidades similares a las ya existentes. Este enfoque reconoce que la esperanza en el corto plazo para muchos ciudadanos que no habitan en la vecindad de las regiones más sofisticadas del estado está en la posibilidad de moverse gradualmente hacia niveles de productividad agrícola más alta.
En este reporte se identifican cuáles son los productos e industrias que ofrecen las mejores posibilidades de diversificación productiva para incrementar la complejidad económica de cuatro de los municipios más complejos de Chiapas, considerando sus capacidades iniciales. Como resultado, se presenta un resumen diferenciado de las principales posibilidades y los retos que debe superar cada lugar para capitalizarlas. Comitán de Domínguez debe centrarse en resolver restricciones logísticas asociadas a conflictos sociales para capitalizar sus posibilidades como destino turístico de alto nivel, y desarrollar una base de fabricación de artículos para el hogar y textiles. San Cristóbal de las Casas está bien posicionado para aprovechar las habilidades desarrolladas en la producción de artesanías y transferirlas a la de textiles sofisticados, en adición a nuevas oportunidades en recubrimientos metálicos, y fabricación de alimentos y bebidas. Para materializar el potencial de Tuxtla Gutiérrez se requiere reconvertir ese amplio sector de servicios que responde a la demanda creada por el gasto público en la capital del estado, en una base de manufacturas más diversa. Los principales candidatos para movilizar esa transformación productiva son los sectores de textiles y peletería, procesamiento de alimentos, y ciertas categorías particulares de maquinaria por línea de producción.
De todas las regiones de Chiapas, Tapachula es la que posee mayor potencial para expandir su base exportadora hacia productos de mayor complejidad. La región concentra la mayoría de las exportaciones del estado, y cuenta con la creación de la Zona Económica Especial (ZEE) y su parque industrial que permiten abordar nuevas capacidades productivas más complejas y adyacentes. Se identifica el potencial de los productos plásticos, de pinturas y películas, y de metalurgia, de relojes y equipos de soldadura, como unas oportunidades únicas en el estado para promover su transformación productiva.
Nuestro reporte concluye con una reflexión sobre la necesidad de traducir la identificación de los potenciales de cada una de las regiones en una realidad distinta, en una economía diversa, compleja, y próspera. La transformación productiva de Chiapas comenzará por la mejora de la productividad agrícola y la creación de oportunidades en las zonas urbanas que permiten aglomeraciones de conocimientos diversos en firmas complejas. El crecimiento económico en Chiapas no requiere innovación, sino más bien de que el estado aprenda del resto de México a producir de manera eficiente los bienes que el resto del país ya produce.
Esta posibilidad exige a su vez de la existencia de un sector público capaz de convocar a firmas existentes, y otras que ya operan en el resto de México, para inaugurar nuevas facilidades de producción en Chiapas, combinando nuevas tecnologías y conocimientos con los que ya existen en la región. Así, se va desarrollando de forma gradual la densidad de su tejido productivo y diversidad económica. En última instancia, la clave para capitalizar el enorme potencial de Chiapas está en un cambio en la orientación del discurso productivo, que priorice la diversificación de la economía y la conquista gradual de sectores de mayor complejidad como herramienta para promover el crecimiento inclusivo.
Chiapas es, comoquiera que se le mire, el estado más atrasado de México. Su ingreso por habitante es el más bajo de las 32 entidades federativas, apenas 40% de la media nacional. Su tasa de crecimiento durante la década 2003-2013 también fue la más baja (0,2%), por lo que la brecha que lo separa del promedio nacional creció de 53% a 60%. Eso quiere decir que hoy en día el ingreso promedio de una entidad federal en México está dos veces y media por encima de Chiapas. Los dos estados que le siguen, Oaxaca y Guerrero, están 25% y 30% por encima de Chiapas2. De acuerdo con el Instituto Nacional de Estadística y Geografía de México (INEGI), Chiapas es también el estado de mayor pobreza (74,7%) y pobreza extrema (46,7%).
How can Rwanda, which currently has one of the lowest levels of income and exports per capita in the world, grow and diversify its economy in presence of significant constraints? We analyze Rwanda's historical growth and trade performance and find that Rwanda's high transportation costs and limited productive knowledge have held back greater export development and have resulted in excessive rural density. Three basic commodities – coffee, tea, and tin – made up more than 80 percent of the country's exports through its history and still drive the bulk of export growth today. Given Rwanda’s high population density and associated land scarcity, these traditional exports cannot create enough jobs for its growing population, or sustainably drive future growth. Rwanda needs new, scalable activities in urban areas. In this report, we identify a strategy for greater diversification of exports in Rwanda that circumvents the key constraints and is separately tailored for regional and global export destinations. Our results identify more than 100 tradable products that lie at Rwanda's knowledge frontier, are not intensive in Rwanda's scarce resources, and economize on transportation costs. Our analysis produces a vision of a more diversified Rwanda, which can be used as a guide for investment promotion decisions. We illustrate an approach that can be applied to other settings in order to identify opportunities for export diversification that take seriously local constraints and external market opportunities.
The paper studies the nature and extent of Egyptian "crony" capitalism by comparing the corporate performance and the stock market valuation of politically connected and unconnected firms, before and after the 2011 popular uprising that led to the end of President Mubarak 30 years rule. First, we identify politically connected firms and conduct an event study around the events of 2011, as well as around previous events related to rumors about Mubarak’s health. We estimate the market valuation of political connections to be 20% to 23% of the value of connected firms. Second, we explore the mechanisms used for granting these privileges by looking at corporate behavior before 2011. It appears that these advantages allowed connected firms to increase their market size and power and their borrowings. We finally compare the performance of firms and find that the rate of return on assets of connected firms was lower than that of non-connected firms by nearly 3 percentage points. We argue that this indicates that the granting of privileges was not part of a successful industrial policy but instead, that it led to a large misallocation of capital towards less efficient firms, which together with reduced competition, led to lower economic growth.
Recent work has supported that there is a connection between domestic debt level and sovereign default on external debt. We examine the potential linkages in a case study of Venezuela from 1984 to 2013. This unique example encompasses multiple financial crises, cycles of liberalization and policy reversals, and alternative exchange rate arrangements. The Venezuelan experience reveals a nexus among domestic debt, financial repression, and external vulnerability. Unlike foreign currency-denominated debt, debt in domestic currency may be reduced through financial repression, a tax on bondholders and savers producing negative real interest rates. Using a variety of methodologies we estimate the magnitude of the tax from financial repression. On average, this financial repression tax (as a share of GDP) is similar to those of OECD economies, in spite of much higher domestic debt-to-GDP ratios in the latter. The financial repression "tax rate" is significantly higher in years of exchange controls and legislated interest rate ceilings. In line with earlier literature on capital controls, our comprehensive measures of capital flight document a link between domestic disequilibrium and a weakening of the net foreign asset position via private capital flight. We suggest these findings are not unique to the Venezuelan case.
During the last years production of fresh vegetables in Albania had an important growth due to the increase in the number of Ha using Greenhouses technologies. Many of the new investments came from former expats who spent a few years working abroad and came back -in some cases because of the crisis in Greece - with money and some experience in the field. However, although exports showed an important growth (in tomatoes, for example exports doubled from 2013 to 2011!), the sector has not been able to definitely take off and be a relevant player in the international market. The problem is not only that the share of Albania in the European trade is almost negligible but also that diversification didn't happen, quality has not improved and as a consequence the prices that Albanian producers get is very low - the lowest in Europe for some products like tomatoes. In this context, Albania has been focusing on the regional markets (probably not consciously but as a consequence of not having established a commercial relation with higher-end markets and not having a proper quality produce to offer), has been excluded from the best markets and has not improved the productive methods, practices, etc. Given this situation the building of new capacity was not necessarily a success: local markets started to be oversupplied and production losses are very high as a consequence.
In this report we analyzed the value chain of the fresh vegetables sector, focusing on the production of tomatoes. We detail the problems of the whole value chain (from the production to the marketing), pointing out the "missing links" that are preventing Albania to become a major tomato exporter in the European market. We find that there is a huge potential for the country - in terms of the natural conditions and also in terms of competitiveness -, but it is very difficult to be reached without making a re-organization of the sector to make it more integrated and give the proper incentives to solve simultaneously all the problems.
We found that in order to improve the general productivity of the sector it is not necessary to make huge capital disbursements. Although some of the constraints are clearly money-related, most of them are organization-related.
What the propose in this report is a method to re-organize the sector in a way that makes it easier for the economic agents to vertically and horizontally integrate and transform the sector into a "factory", where every participant has its defined role and work is divided with specific roles. The role of the Government is twofold: first, to facilitate the organization of this model, find the actors that can lead the change and provide them the incentives to coordinate. Second, to provide all the public goods that are now missing or incomplete (not only in terms of infrastructure but also in terms of marketing, negotiations, etc). In the next sections we explain with detail the constraints and missing links we found throughout the value chain of tomatoes and propose a new model to solve them. We show that with little organizational changes, Albania could increase its tomato exports by four times in a few years.
This paper examines the microeconomic determinants of residential real estate prices in Caracas, Venezuela, using a private database containing 17,526 transactions from 2008 to 2009. The particular institutional characteristics of many countries in Latin America, and Venezuela in particular, where land invasions and expropriations (with only partial compensation) have been common threats to property owners, provide us with an opportunity to test the effects of these risks on housing prices using a unique database. The effect of these risks on property prices is negative and significant. To our knowledge, this is the first attempt to quantify these impacts in the Hedonic pricing literature applied to real estate. Size, the number of parking spaces, the age of the property, the incidence of crime, and the average income in the neighborhood are significant determinants of prices. Finally, this paper analyzes the microeconomic determinants of housing prices at the municipal level.
Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or non‐local founders of establishments create most novelty in a region? Using matched employer/employee data for the whole Swedish workforce, we determine how unrelated and therefore how novel the activities of different establishments are to a region’s industry mix. Up‐ and downsizing establishments cause large shifts in the local industry structure, but these shifts only occasionally require an expansion of local capabilities because the new activities are often related to existing local activities. Indeed, these incumbents tend to align their production with the local economy, deepening the region’s specialization. In contrast, structural change mostly originates via new establishments, especially those with non‐local roots. Moreover, although entrepreneurs start businesses more often in activities unrelated to the existing regional economy, new establishments founded by existing firms survive in such activities more often, inducing longer‐lasting changes in the region.
Despite their historic and ethnic ties, trade and investment between Albania and Kosovo remains underdeveloped. To be sure, even if fully developed, Kosovo is unlikely to play a major role in Albanian external economic relations. Nonetheless, increased economic integration between the two countries can serve as the basis not only for enhancing the ties between the two countries, but also for spurring the measures that could act as a springboard for Albania’s integration with respect to other countries in the Balkans as well as with the EU.
Aim of this paper is to introduce the complex system perspective into retail market analysis. Currently, to understand the retail market means to search for local patterns at the micro level, involving the segmentation, separation and profiling of diverse groups of consumers. In other contexts, however, markets are modelled as complex systems. Such strategy is able to uncover emerging regularities and patterns that make markets more predictable, e.g. enabling to predict how much a country’s GDP will grow. Rather than isolate actors in homogeneous groups, this strategy requires to consider the system as a whole, as the emerging pattern can be detected only as a result of the interaction between its self-organizing parts. This assumption holds also in the retail market: each customer can be seen as an independent unit maximizing its own utility function. As a consequence, the global behaviour of the retail market naturally emerges, enabling a novel description of its properties, complementary to the local pattern approach. Such task demands for a data-driven empirical framework. In this paper, we analyse a unique transaction database, recording the micro-purchases of a million customers observed for several years in the stores of a national supermarket chain. We show the emergence of the fundamental pattern of this complex system, connecting the products’ volumes of sales with the customers’ volumes of purchases. This pattern has a number of applications. We provide three of them. By enabling us to evaluate the sophistication of needs that a customer has and a product satisfies, this pattern has been applied to the task of uncovering the hierarchy of needs of the customers, providing a hint about what is the next product a customer could be interested in buying and predicting in which shop she is likely to go to buy it.
Income per capita in Uganda has doubled in the last 20 years. This remarkable performance has been buoyed by significant aid flows and large external imbalances. Economic growth has been concentrated in non-tradable activities leading to growing external imbalances and a growing gap between rural and urban incomes. Future growth will depend on achieving sufficient export dynamism. In addition, growth faces a number of other challenges: low urbanization rate, rapid rural population growth and high dependency ratios. However, both the dependency ratio and fertility rates have begun to decline recently. Rural areas are also severely overcrowded with low-productivity subsistence agriculture as a pervasive form of production. Commercial agriculture has great possibilities to increase output, but as the sector improves its access to capital, inputs and technology it will shed jobs rather than create them.
These challenges combined tell us that future growth in Uganda will require a rapid rate of export growth and economic diversification. The country faces the prospect of an oil boom of uncertain size and timing. It could represent an important stepping stone to achieve external sustainability, expanded income and infrastructure and a greater internal market. However, as with all oil booms, the challenges include avoiding the Dutch disease, managing the inevitable volatility in oil incomes and avoiding inefficient specialization in oil. Policies that set targets for the non-oil deficit could help manage some of these effects, but a conscious strategy to diversify would still be needed.
The best strategy is therefore to use the additional oil revenue and accompanying investments to promote a diversification strategy that is sustainable. To determine how to encourage such a transformation, we draw on a new line of research that demonstrates how development seldom implies producing more of the same. Instead, as countries grow, they tend to move into new industries, while they also increase productivity in existing sectors. In this report, we analyze what those new industries might be for Uganda.
To do so, we first look to those products which balance the desire to increase the diversification and complexity of production, while not over-stretching existing capabilities. These include mostly agricultural inputs, such as agrochemicals and food processing. In addition, Uganda should concurrently develop more complex industries, such as construction materials, that are reasonably within reach of current capabilities and will be in great demand in the context of an oil boom. Here, the fact that Uganda is landlocked and faces high import costs will provide natural protection to the expanding demand in Uganda and neighboring countries. We conclude with a discussion of the government policies that will support Uganda in developing new tradable industries.
The comparative advantage of a location dictates its industrial structure. Current theoretical models based on this principle do not take a stance on how comparative advantages in different industries or locations correlate with each other, or what such patterns of correlation might imply about the underlying process that governs the evolution of comparative advantage. In fact, we find that correlations do appear to exist: industries tend to exhibit output intensities that are systematically correlated across locations, and locations tend to have output intensities that are correlated across industries. We give evidence that these patterns are present in a wide variety of contexts, namely the export of goods (internationally) and the employment, payroll and number of establishments across the industries of subnational regions (in the US, Chile and India). We then calculate the industry intensities that are implied by related industries or related locations, and show that these measures explain much of the location’s current industrial structure. Furthermore, the deviations between the actual industry structure and our implied comparative advantage measures tend to be highly predictive of future industry growth, especially at horizons of a decade or more; this explanatory power holds at both the intensive as well as the extensive margin. These results indicate that future productivity is already implied in today’s patterns of production.
We propose and implement a new technique for measuring the total magnitude of a growth episode: the change in output per capita resulting from one structural break in the trend growth of output (acceleration or deceleration) to the next. The magnitude of the gain or loss from a growth episode combines (a) the difference between the post-break growth rate versus a counter-factual "no break" growth rate and (b) the duration of the episode to estimate the difference in output per capita at the end of an episode relative to what it would have been in the "no break" scenario. We use three "counter-factual" growth rates that allow for differing degrees of regression to global average growth: "no change" (zero regression to the mean), "world episode average" (full regression to the mean) and "unconditional predicted growth" (which uses a regression for each growth episode to predict future growth based only on past growth and episode initial level). We can also calculate the net present value at the start of an episode of the gain or loss in output comparing the actual evolution of output per capita versus a counter-factual. This method allows us to place dollar figures on growth episodes. The top 20 growth accelerations have Net Present Value (NPV) magnitude of 30 trillion dollars - twice US GDP. Conversely, the collapse in output in Iran between 1976 and 1988 produced an NPV loss of $143,000 per person. The top 20 growth decelerations account for 35 trillion less in NPV of output. Paraphrasing Lucas, once one begins to think about what determines growth events that cause the appearance or disappearance of output value equal to the total US economy, it is hard to think about anything else.