Seite - (000041) - in Disrupted Development and the Future of Inequality in the Age of Automation

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.