Deconstructing the BRICs: Structural transformation and aggregate productivity growth

de Vries, Gaaitzen J., Erumban, Abdul A., Timmer, Marcel P., Voskoboynikov, Ilya-Deconstructing the BRICs: Structural transformation and aggregate productivity growth This paper studies structural transformation and its implications for productivity growth in the BRIC countries (Brazil, Russia, India, and China) from the 1980s onwards. Based on a critical assessment of the reliability and consistency of various primary data sources, we bring together a new database that provides trends in value added and employment at a detailed 35-sector level. Structural decomposition analysis suggests that for China, India and Russia reallocation of labor across sectors is contributing to aggregate productivity growth, whereas in Brazil it is not. This confirms and strengthens the findings of McMillan and Rodrik [NBER Working Paper 17143, 2011]. However, this result is overturned when a distinction is made between formal and informal activities within sectors. Increasing formalization of the Brazilian economy since 2000 appears to be growth-enhancing, while in India the increase in informality after the reforms is growth-reducing. Journal of Comparative Economics 40 (2) (2012) 211-227. Groningen Growth and Development Centre, Faculty of Economics and Business, University of Groningen, The Netherlands; Institute of Economic Research, Hitotsubashi University, Tokyo, Japan; The Conference Board China Centre, Beijing, China; Laboratory for Inflation Problems and Economic Growth, Higher School of Economics, Moscow, Russia. (C) 2012 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved