Old and New Dualisms in Latin America and Asia: Labour Productivity, International Competitiveness and Income Distribution

Abstract

Using sectoral growth accounting techniques, the paper analyzes the structural determinants of labour productivity in Asia and Latin America c, indicating a contrasted situation between both developing regions. While Asia appears to be engaged in a relatively smooth transition from the low productivity traditional activities to a more industrialized economy, the pattern emerging out of the Latin American data indicates the presence of polarizing forces, and the resurgence of a new dualistic economy. From a systemic perspective, Asia has been progressively closing the productivity gap with industrialised countries, gaining international competitiveness, while Latin America has been losing ground despite advances at the microeconomic level. Two structural trends led to the deterioration of the income distribution in Latin America: strong demand for high qualification workers, pushing up the salary of professionals and technicians (same happened in Asia); and a deficit of job opportunities in the manufacture sector, leading to an excess supply of labour in the services sector and a decline in value added per worker. The emergence of a large urban informal sector in Latin America epitomizes this situation. The structural models used for the analysis suggest also some lines of action for policy making, facilitating resource reallocation from low to high productivity sectors, while limiting spurious inter-sectoral shifts.

Keywords: sectoral shift-share, transition, convergence, income distribution, competitiveness

JEL Classification: O11, O41, O54