“Most countries in the developed world (North America, Europe and developed Asia) experienced a slowdown in productivity growth rates in 2005…Countries at the higher end of the global productivity spectrum are mainly emerging markets, including Eastern and Central European economies – e.g. Poland (7.7%). While Mexico’s productivity growth rate was relatively low at less than 1% per year both in 2004 and 2005, Korea (2.6%) and Turkey (3.7%) remained at the higher end of OECD countries. But India and in particular China showed much faster productivity growth at 4.4% and 8.4% respectively in 2004.”
The rapid growth in productivity in the emerging economies is not too hard to interpret, there is some kind of ‘technological catching-up’ going on. Also as these economies move out of agriculture, through industry and on towards services there is again is a constant productivity bonus.
The India-China comparison is also not too hard to interpret:
“India’s slower productivity growth (4.4% in 2004, and 4.1% on average from 2000-2004) should be seen in the perspective of faster employment growth at about 2% during recent years, which is double the growth of labor input in China. China experienced a similar phase of moderate productivity growth during the late 1980s and early 1990s.”
This is again exactly what demographic dividend theory would lead you to expect. There are two plusses to changing age structure. The first is a compositional one: as the working age population becomes an increasing part of the population and consequently labour force participation rates rise. The second is a “behavioural one”: as the core of the ‘thickest generations’ move up the age ranges they acquire more experience, in the jargon ‘there are a greater proportion of prime-age workers’, and so naturally productivity rises.
What we are seeing at present is the dominance of the former effect in India, and the dominance of the latter one in China. In terms of the demographic ‘window of opportunity’ India is now where China was in the late 80′s and early 90′s. This can be seen clearly by looking at the respective median ages: China 32.26 (fast approaching the US at 36.27) while India is still only 24.66 (collectively that is).