Southern growth engines and technology giants:introduction

Amelia U. Santos-Paulino • Guanghua Wan

Received: 15 July 2010 / Accepted: 2 August 2010 / Published online: 15 August 2010

� UNU-WIDER 2010

Abstract Fast-growing developing countries have emerged as an important des-

tination and source of trade, investments and technology. Furthermore, trade

between developing countries has grown rapidly over the last decades, and is

becoming more diversified, where exchange includes from primary commodities to

manufactures and high-end services. The aim of the special issue is to look at these

dynamics and how the leading developing countries have turn into growth engines

and technology drivers.

Keywords China � India � Brazil � South Africa � Growth � Innovation �Trade specialization

1 Background

Fast-growing developing countries have emerged as an important destination and

source of trade, investments and technology. Furthermore, trade between develop-

ing countries has grown rapidly over the last decades, and is becoming more

diversified. Trade comprises primary commodities, manufactures and high-end

services (Santos-Paulino and Wan 2010). The aim of the special issue is to look at

these dynamics and how the leading developing countries have turn into growth

engines and technology drivers.

The special issue results from the UNU-WIDER research project ‘Southern

Engines of Global Growth’, directed by Amelia U. Santos-Paulino and Guanghua

A. U. Santos-Paulino (&)

World Institute for Development Economics Research (WIDER), United Nations University

Katajanokanlaituri 6B, 00160 Helsinki, Finland

e-mail: amelia@wider.unu.edu

G. Wan

Yunnan University of Finance and Economics, Kunming, China

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Econ Change Restruct (2011) 44:1–5

DOI 10.1007/s10644-010-9096-2

Wan. The project focuses on the economic impact of China, India, Brazil and South

Africa (CIBS) on the global economy and the implications for global governance.

The project examines the flows of goods, services and investment from and to CIBS;

discusses the rise of CIBS and associated critical issues such as energy demand,

climate change and regional conflicts; and explores implications for international

governance. The papers in the issue were selected from WIDER’s annual

development conference ‘Southern Engines of Global Growth: China, India, Braziland South Africa’ held in Helsinki in September 2008.

2 Content of the special issue

The papers in the volume cover a broad range of issue in the growth, trade and

technology fields. The first paper in this special issue is entitled ‘Economic

Efficiency and Growth Evidence from Brazil, China, and India’ by Nader Nazmi

and Julio E. Revilla. Using stochastic production frontier models, the paper

estimates the contributions of factors of production and technology to growth and

measures production inefficiencies in each country. The study concludes that rapid

growth of India and China is mostly explained by efficiency improvement.

Technical efficiency in Brazil has improved substantially since the mid-1990s, yet it

remains less efficient than China and India. Changes in production efficiency over

time are related to three structural factors: reduced government consumption,

increased openness to trade, and more competitive exchange rates. The stylized

facts could derive important lessons for other emerging and developing countries.

Related to the first paper, Mario Cimoli, Wellington Pereira, Gabriel Porcile, and

Fabio Scatolin analyse structural change and economic growth in China, India,

Brazil, and South Africa. The authors compare the performance of these countries

by focusing on the direction and intensity of structural change (i.e., those in which

technologically intensive sectors increase their participation in the economy) in

CIBS. Structural change has been relatively weak in Brazil, contributing to a less

dynamic growth performance since the 1980s. Further, Brazil, India and South

Africa structurally diverged with respect to the benchmark of the United States.

Structural divergence was modest in China’s case. This is partly attributable to the

high growth rates in sectors like electrical machinery, which have a larger

participation in China than in the United States. Also, the share of medium and high

technology exports is higher in China than in the other countries. The study offers

various explanations for the empirical findings, but the exchange rate policies,

particularly in China and Brazil, are found to be key drivers.

Peilei Fan evaluates the contribution of innovation capacity to economic

development in China and India, where the output of the national innovation system

is measured by patents and high-tech and service exports. The paper shows that

innovation capacity has contributed significantly to the economic growth of China

and India in the 1990s. The enhanced innovation capacity of China and India is

primarily due to the high investment in the inputs of innovation: R&D expenditure

and R&D personnel. The paper also emphasizes the role that the government has

played in promoting innovation capacity in both countries, and in transforming the

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national innovation systems. Particularly worth noting are government initiatives

that foster linkages of the science sector with the business sector, providing

incentives for innovation activities, and balancing import of technology and

indigenous R&D effort. Using case studies of domestic biotech firms in China and

India, Fan produces micro-level insights on innovation capacity and economic

development: innovation capacity has become essential for domestic firms’ market

success. Also, global institutional factors and national government policies on

innovation have considerable influence on the choice of innovation at the firm level

(i.e., to conduct indigenous R&D or to import foreign technology).

Amelia U. Santos-Paulino’s paper ‘Trade Specialization, Export Productivity and

Growth in Brazil, China, India, South Africa, and a Cross Section of Countries’

analyses the patterns of export productivity and trade specialization profiles in

Brazil, China, India and South Africa, and in other economic groupings and regions.

The study estimates various measures of trade specialization and a time varying

export productivity indicator, using highly disaggregated export data. The findings

show that there are important differences in the export productivity and

specialisation patterns across countries and regions. Export productivity and export

sophistication are in line with those of wealthier and more advance economies. The

results further confirm the importance of not just the volume of exports, but the type

of specialisation patterns.

Wim Naude and Riaan Rossouw further examine the impact of export

productivity and specialization on economic performance in Brazil, China, India

and South Africa. By using Applied General Equilibrium (AGE) models for each

country the findings reveal important similarities as well as differences in the

patterns of diversification in these countries. The results confirm the stylized fact

that a country’s export basket depends on its level of economic development, as

measured by per capita GDP, and follows a U-shape pattern. The paper also

illustrates that export diversification Granger-causes GDP per capita in Brazil,

China and South Africa, but not in India, where it is rather GDP per capita changes

that drive export diversification. The AGE modeling shows that South Africa is the

only case where export diversification has an unambiguously positive impact on

economic development. In Brazil, China and India, it is rather export specialization

that drives growth. The paper concludes that the manner in which export

diversification is obtained may be important. Explicitly, the best outcome would

be to achieve higher sophistication of exports without reducing the share of

traditional exports.

The paper ‘China’s Exports in Information, Communication and Technology

(ICT) and its Impact on Asian Countries’ by Yuqing Xing focuses on high

technology exports, and analyses China’s ICT exports growth in the major markets

of Japan and the US. The analysis finds that (a) Chinese exports experienced rapid

growth since the early 1990s; (b) the market shares in both Japan and the US have

raised sharply, maintaining two-digit annual growth during the period under study;

(c) most of the Chinese ICT exports are attributed to foreign invested firms; and (d)

the shrinking market shares on third markets (i.e. other Asian developing countries)

may be the result of the multinationals’ relocation process rather than intensified

competition from Chinese exports.

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Finally, Thomas Gries and Margarete Redlin evaluate the relationship between

international integration and regional development in China. The paper attempts to

identify the growth determinants at the provincial level and assess the extent to

which growth has contributed towards reducing regional disparity in China. The

authors show that while China’s high average growth is driven by a small number of

rapidly developing provinces, the majority of provinces have experienced a more

moderate development. A stylized model of regional development is then

introduced, which is characterized by two pillars. The first pillar is international

integration indicated by FDI and/or trade, leading to imitation of international

technologies, technology spill-over and temporary dynamic scale economies. The

second pillar relates to domestic factors indicated by human and physical capital

available through interregional factor mobility. Relying on panel data and GMM,

the analysis supports the predictions from the theoretical model of regional

development: FDI and trade have a significant and positive impact on regional

development. The paper also provides evidence of catching up and non-steady state

process across China’s provinces, mostly due to the highly significant human and

real capital. Surprisingly, important factors such as labour, government expendi-

tures, urbanization and agglomeration do not appear to contribute significantly to

regional growth. The findings related to the labour market suggest that China has

not yet reached a turning point in the availability of workers as elucidated in the

model by Arthur Lewis.

3 Conclusion

The structure of production and the specialisation of trade have evolved in recent

years, notably in emerging economies such as China, Brazil and India.1 Existing

research further shows that during the last two decades developing countries have

become increasingly engaged in sophisticated and technology-intensive production

and trade. This has been reflected in their trade specialization, shifting from labour-

intensive to capital-intensive commodities, and in rapid productivity gains across all

manufacturing activities. A key finding from the literature is that countries with

higher share of technology-intensive sectors benefit more from technological

learning and innovation. In addition, they are more able to respond to changes in the

international markets and to enter new and more dynamic productive sectors.

Finally, the new pattern of specialization challenges the traditional assumption

that knowledge creation is exclusively the domain of advanced economies. Drivers

of such change include investment on knowledge and innovation activities and the

growing link between high-technology companies and local research. Foreign direct

investment, and multinational enterprises’ investment on knowledge creating

activities such as research and development (R&D), is concentrated in a few

emerging countries. China, India, and Brazil are considered three of the top ten

destinations for foreign R&D expansion (Santos-Paulino et al. 2008). China has

experienced the strongest growth in scientific research, surpassing any country

1 See also Hausmann et al. (2007), Puga and Tefler (2007), and Santos-Paulino (2010).

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whether developed or developing. Brazil and India have also built up prominent

research records, with an extraordinary expansion of peer-reviewed studies in

material sciences (i.e. engineering, chemistry, and physics.).2

Overall, the topics covered in the special issue convey a message on the

importance of technology, knowledge, and innovation, embodied in the global

exchange of goods and services, for growth and development. Hopefully, this issue

will stimulate more research in the area.

Acknowledgments We are grateful to the Journal’s Editor, George Hondroyiannis, for facilitating the

publication of the special issue, and to anonymous referees for helpful comments and reviews. We thank

Tony Shorrocks and colleagues for useful guidance and suggestions. We are also indebted to Janis

Vehmaan-Kreula and Barbara Fagerman for valuable support. Adam Swallow and Neha Mehrotra

provided helpful assistance during the publication process. UNU-WIDER gratefully acknowledges the

financial contributions to the research programme by Denmark’s Royal Ministry of Foreign Affairs,

Finland’s Ministry for Foreign Affairs, the Swedish International Development Cooperation Agency

(SIDA) and the United Kingdom’s Department for International Development (DFID).

References

Hausmann R, Hwang J, Rodrik D (2007) What you export matters. J Econ Growth 12:1–25

Puga D, Tefler D (2007) Wake up and smell the Ginseng: the rise of incremental innovation in low-wage

countries. NBER working paper 11571. National Bureau of Economic Research, Cambridge, MA

Santos-Paulino AU (2010) Export productivity and specialisation: a disaggregated analysis. World Econ,

forthcoming

Santos-Paulino AU, Wan G (2010) The rise of China and India, forthcoming, Palgrave Macmillan

Santos-Paulino AU, Squicciarini M, Fan P (2008) R&D (Re)location: a bird’s eye (Re)view. WIDER

research paper no. 2008/100

2 Bric nations see big shift in scientific landscape, Financial Times, Tuesday January 26, 2010.

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