CAPABILITIES FOR PRODUCTIVE TRANSFORMATION AND EMPLOYMENT

Irmgard Nübler

Research Department International Labour Office

Prepared for the High Level Symposium on Industrial and Trade PoliciesTehran, 10 -11 October 2015

2

ECONOMIC TRANSFORMATION: TWO DISTINCT PROCESSES

Develop productive capacities - investment

Build up domestic capabilities - learning

3

A CONCEPT OF CAPABILITIES

Explains

how capabilities shape economic transformation and catching up

where domestic capabilities reside

how capabilities evolve

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TWO DIMENSIONS OF CAPABILITIES

1. Options for diversification – feasible patterns of economic and technological transformation

2. Competences to innovate, invest and manage transformation process – sustained and rapid process

Successful catching up requires a continuous increase of options and competences

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OPTIONS FOR DIVERSIFICATION

reside in the particular mix of general, technical, cultural and business knowledge in labour force

the more diverse, sophisticated and complex the knowledge base, the wider the range of new products and industries which can be developed.

Policies to develop wide options Education, training, industrial, technology policies

OPTIONS FOR DIVERSIFICATION

Educational attainment structure and development of manufacturing A TYPOLOGY

Share of no schooling, incomplete primary, complete primary, lower secondary, upper secondary, post secondary education

INDUSTRIAL STRUCTURES IN STRONG MIDDLE AND MISSING MIDDLE COUNTRIESIAI: INDUSTRIAL ADVANCE INDEXTAI: TECHNOLOGICAL ADVANCE INDEX

Strong middle: increase both high IAI and TAI (industrial widening and deepening) Missing middle: low and medium IAI level, increase TAI at given IAI level

0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.650

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

SYR

BOL

SLV

BGRARG

CRI

THABRA

MUSNIC ECU

PERURY

VEN

CHLBRB

COL JORZWE

ZAF

Missing middle EAS countries

Industrial Advance Indicator

Tech

nolo

gica

l Adv

ance

Indi

cato

r

0 0.1 0.2 0.3 0.4 0.5 0.6 0.70

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

CUB FJIBWA

LKA

CYPROM

POLHRV

CHNSVN

SVK CZE

MEX HUN

MYS

SGP

PAN

HKG

PHL

IRLKOR

TWN

ISR

RUS

Strong middle EAS countries

Industrial Advance Indicator

Tech

nolo

gica

l Adv

ance

Indi

cato

r

8

COMPETENCES FOR SUSTAINED AND RAPID TRANSFORMATION PROCESS

Competences exist at collective levels of Enterprises (in technological, management and

organisational routines Governments (in policy formulation, implementation and

evaluation procedures) Societies (in formal and informal institutions)

Acquired in a process of learning by doing and practice Learning is supported by policies and institutions that

provide learning opportunities (carrots) and pressure to learn (sticks)

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CONCLUSION Industrial development requires process of building

productive capacities (investment) and domestic capabilities (learning)

Capabilities cannot be imported Governments are challenged with formulating a

comprehensive learning strategy at different places and at different levels

The development of capabilities is a fundamental element of industrial and economic development strategies.

Transforming economies: Making industrial policy work for growth, jobs and development

Transforming Economies:

Making industrial policy work for growth,jobs and development

EDITORS:José Manuel Salazar-XirinachsIrmgard NüblerRichard Kozul-Wright

2014ILO Geneva

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12

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KNOWLEDGE STRUCTURE OF THE LABOUR FORCE AND RECOMBINATION FOR NEW PRODUCTS

Different knowledge elements in the labour force (dots in blue space)

A product P is the combination of different , complementary knowledge elements.

P1 –P5 are the products that can be produced with the knowledge elements embedded in the labour force

EDUCATIONAL ATTAINMENT STRUCTURES (EAS)AND OPTIONS

• Strong Middle (SM) –broad supply of complementary knowledge elements and occupations required in manufacturing (technicians, clerks, machine operators, managers, engineers etc)

• Missing Middle (MM) – extremely low supply of occupations based on upper secondary education required in manufacturing, limits the expansion of manufacturing base, but allows to develop small high tech sector, and advanced service sector,

• L-shape: very limited supply of secondary and post-secondary education based occupations, seriously limits development of manufacturing even at low tech level.

Educational attainment structures and industrial development levels – empirical findings

L L+ Dual Missing middle Missing middle + Strong middle Strong middle +0

0.1

0.2

0.3

0.4

0.5

0.6

MLI

BGD

IRNSYR NIC BWA

PANRWA

GTM

JAM

BOL

ECU

CHN

HKG

NER

IND

KWT

SLV

PER

HRV

PHL

BEN

LSO

BHR

ARG

VENCUB

KOR

MWI

PAK

SWZ

BGR

CHL

CYP

TWN

CAF PRY

GHA

CRI

URY

CZE

IRL

CMR ZMB

DZA

BRA

COL

FJI

ISR

PNG

TTO

THA

ZWE

HUN

TZA

EGY

MUS

BRB

MYS

UGA

TUNJOR

MEX

TGO

IDNZAF

POL

GMB

ROM

KEN

RUS

SDN

SGP

NPL

SVK

SEN

SVN

LKA

Educational StructureIndu

stria

l and

tech

nolo

gicc

al a

dvan

ce (I

TA)

Inde

x

IMPORT CONTENT OF EXPORTS: EMERGING ECONOMIESin foreign value added share of gross export (bubble size)

0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 0.6 0.65 0.70.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

ARG

BRA

BGR

CHL

CZE

HKG

HUN

INDIDN

IRL KORMYS

MEX PHL

POL

ROM

RUS

SGP

SVKSVN

ZAF

TWN

THA

Industrial Advance Indicator

Tech

nolo

gica

l Adv

ance

Indi

cato

r

Missing middle EAS Strong middle EAS L+ or Dual EAS

• Indicates vertical specialisation of countries and integration in value chains• Countries with SM EAS (green) increased both IAI and TAI • Through vertical specialisation (show largest bubbles) • Generating productive transformation

INDUSTRIAL AND EDUCATIONAL ATTAINMENT STRUCTURES IN SUB-SAHARAN AFRICA

L-shapeL+DualMMSM