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3 DEINDUSTRIALIZATION AND TERTIARIZATION IN THE DEVELOPING … 31
they are not physical goods that can be compared. Fischer (2014) also
notes another problem that, because transnational companies (TNCs)—
who dominate production and its coordination in global value chains—
conduct practices such as transfer pricing and the transferring of profits
from Southern subsidiaries to Northern HQs (for example, low-interest
loans from subsidiary to parent company), such actions could make the
subsidiary look less productive. These are clearly important issues that,
although not easily resolved, should not be forgotten.
2. See also Dasgupta and Singh (2006), Heintz (2009), Rowthorn and
Ramaswamy (1999), Amirapu and Subramanian (2015). Lewis (1979, p.
220) notes that “the surest way to run into trouble is to have ‘de-industrial-
ization’ (industrial employment growing more slowly than the labor force),
since this means that the reservoir or cheap labor will be filling instead of
emptying. The political and social health of the community, no less its eco-
nomic health, requires a continual transfer from the reservoir to the more
productive sectors, rather than the relative expansion of the reservoir.”
3. We construct regional aggregates as follows: East Asia includes China,
Indonesia, Malaysia, Philippines, and Thailand; South Asia includes India;
Latin America includes Argentina, Bolivia, Brazil, Colombia, Costa Rica,
Mexico, Peru, and Venezuela; Sub-Saharan Africa includes Botswana, Ethiopia,
Ghana, Kenya, Malawi, Nigeria, Senegal, South Africa, and Tanzania.
4. In the graphs, the labor and human capital accumulation contribution is
smaller (or the physical capital contribution share is larger) than in Anand
et al. (2014) because they assume (22), as does Kaldor (1957), that the
labor share is constant at two-thirds across all countries and all years. This
is based on Cobb-Douglas (1928) who argued empirically (based on the
United States) that labor shares are static, as labor is paid according to
its own productivity (see Douglas 1976). However, when one takes the
labor shares from the latest Penn World Tables we find that the labor
share ranges substantially. For example, in 2005, from a minimum of 0.18
to a maximum of 0.89 and a mean of 0.52 in 2005. Thus, of the set of
countries we use here, the labor share is much lower than the commonly
thought two-thirds share for most years, and therefore the labor share is
a smaller contributor and the capital share is a bigger contributor if one
takes into account the actual labor shares.
5. This is an alternative view on the “middle-income trap” debate. Rather
than seek to plot a growth slow-down, the figure plots productivity growth
versus GDP per capita and demonstrates a middle-income trap as a pro-
ductivity slow-down in Latin America in all sectors but agriculture.
Disrupted Development and the Future of Inequality in the Age of Automation