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Rodrik suggests that as a result of current trends, “ new path will have to be invented. Predictions of job losses and gains from automation And the global shift in demand towards (less-traded) services suggests challenges for the next generation of countries hoping to use manufacturing exports to develop. Connected to and exacerbating these problems, we have seen a declining job-intensity of exports overall. This compares to products that were not part of global value chains, where wage competitiveness was the (only) factor of those examined which mattered for location-an important reason why manufacturing traditionally helped lower-income countries catch up. Worse, analysis by Rodrik and colleagues finds that for outputs produced in global value chains, the comparative advantage of those countries further behind was already loosening: wage competitiveness is not a significant determinant of participation but proximity to major markets, human and physical capital, institutional and logistics capacity all matter.
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If this is the beginning of a trend, it would be harmful to African development prospects.ĭani Rodrik notes that the move towards fragmented production-global value chains that have proven important to manufacturing growth in countries including China-has declined since 2011. And there have been cases of impact already: Foxconn replacing 30 percent of its workforce when it introduced robots, and 1,000 lost jobs in Vietnam when Adidas shuttered a factory and moved production to “speed factories” in Germany and the US. That would imperil a recent run of global income convergence. Study Group on Technology, Comparative Advantage, and Development ProspectsĪdvanced manufacturing and AI applications including automated call centers might even reverse the trend towards manufacturing and low-skilled services moving to developing countries.