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Perspectives on Global Development 2014

Boosting Productivity to Meet the Middle-Income Challenge

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Developing economies continue to grow faster than more advanced countries. Non-OECD countries’ share in world GDP surpassed that of OECD countries in 2010. Since its first edition in 2010, the annual Perspectives on Global Development has investigated the trends in “shifting wealth”, the increasing economic weight of developing countries in the world economy. “Shifting wealth” has received a boost through the rise of China, which has also led to positive spillover effects on developing economies that supply China’s demand for resource-based products and intermediates. However, even at their higher rates of growth since 2000, the per capita incomes in developing countries – including many middle-income countries – will not reach the levels of developed countries by 2050. Boosting productivity growth in middle-income countries could stem this trend and is the focus of this report. At the same time, this growth needs to be inclusive so a real convergence in living standards can take place.

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Competitiveness in a catching-up context

OECD Development Centre

This chapter examines ways to foster competitiveness and increase productivity to avoid the middle-income trap. It begins by contrasting the achievement of developing economies in boosting per capita incomes with their more uneven labour productivity growth. The first section examines trends in diversification and specialisation as a factor explaining low productivity growth and discusses the importance of diversifying into higher value-added sectors. The last four sections of the chapter present some of the core underlying factors that can foster sustainable competitiveness and increase productivity, including: product, labour and financial market institutions and public governance; synergies between education and technology policies, examining educational attainment and the channels through which middle-income countries tap global knowledge and generate knowledge domestically; policies to create equality of opportunity, looking at recent trends in income distribution; and finally, the crucial role that effective governments play in implementing reforms.

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