Tag Archive: Developing countries

What makes companies in one country so much more productive than in another?

In the 1950s, Ghana was twice as rich as South Korea. By 2011, the most recent year for which data is available, South Korea’s income was more than ten times higher than Ghana’s.

Yet these differences in productivity between the overall economies of the two countries are modest compared with the differences that appear to exist in the productivity of their manufacturing firms. My colleague Simon Baptist and I set up such a comparison and were surprised by the size of these differences.

You could argue that rich countries simply have more resources so their companies are bound to be more productive – or have higher levels of output per worker. But my research suggests that this is not the answer.

The surveys covered the main sectors within manufacturing, textiles, garments, furniture, food and electrical goods. While the sectors are the same, clearly the type of firms within them will be very different across the two countries.

Median output – the amount of garments or furniture produced per employee – is nearly 20 times higher in South Korean manufacturing firms than in Ghanaian ones. Whereas in South Korea the median worker produces US$193,000 of output a year, the comparable number in Ghana is US$10,000.

If you look at this in terms of the value added to the products by the worker, the differences are even larger: the average Korean worker produces US$117,000 and a Ghanaian worker only US$3,000, nearly 40 times less in terms of added value. The Ghana data comes from a panel survey of the country’s manufacturing firms over the period from 1991 to 2003 and the South Korean data is for the period 1996-1998.

Making use of what you put in

In our search for the source of that difference, we identified three factors. First, the amount of capital the firms employ; second, the importance of education and, third, the differences in the underlying efficiency with which the firms operate.

This concept of underlying efficiency is sometimes called “total factor productivity” and can be thought of as how much more effective a firm is at using all of its inputs – such as its capital and labour – than other firms. Most economists think differences in underlying efficiency are the most important reason for the large differences we see across countries and also across firms.

At first sight that also appears to be the case in our comparison of Ghanaian and Korean firms. In the first graph below, the vertical axis shows output per labour hour and the horizontal axis, capital per labour hour. The key point in the figure is the distance between the two lines, which measures the average differences in the efficiency with which firms in the two countries use capital and labour.

Labour productivity on capital per labour hours
Author provided

While there is some overlap, showing that some Ghanaian firms are as efficient as Korean ones, on average the differences are large. The chart implies that, on average, Korean firms produce six times more output with the same capital and labour as Ghanaian ones. That is one measure of underlying productivity.

The importance of education

Yet, the chart omits the possible role of education. When we included education in our analysis we find that its impact on output was massively larger in Korea than in Ghana.

The second graph below shows how education affects output per labour hour: the green line shows the effect for South Korea, the blue line the effect for Ghana. Most firms employ a workforce that have had on average between five and 15 years of education. Over this range, output per labour hour in South Korea increases dramatically; but for Ghana it scarcely changes.

How does education increase labour productivity?
Author provided

This analysis implies that all the differences in productivity across the two countries can be explained by how much more effective education is at increasing output in South Korea than it is in Ghana.

It is very hard to show whether these changes in education actually cause the differences seen in the chart. But it is clear that something associated with education is having very different effects in the two countries.

A quality controller at a South Korean mobile phone component plant.
Kim Hong-Ji/Reuters

Several possible explanations suggest themselves. The first and most obvious is that the quality of education differs across the countries. A second possibility is that human and physical capital are being combined in fundamentally different ways in the two countries.

Take a simple example: a machine operator in South Korea operating a robot to produce garments may have the same number of years education as a machine operator in Ghana operating an electrical sewing machine. Even allowing for the substantial differences in capital – between a high-tech robot and a sewing machine – it is still very possible that one can be five times as productive as the other.

A third possibility is that the quality of the management is the key difference. Recent research, provides some evidence that poor management may explain low productivity within firms, although further research is needed to explain how management is linked to the uses made of educated labour.

Taken together these explanations imply that while the quality of education makes a massive difference to manufacturing output in South Korea, it would be a mistake to think that investing in education alone is the answer to increasing productivity. It’s important to also consider the quality of that education, the technology the firms are able to employ cost-effectively, and the quality of the management.

The Conversation

Francis Teal, Research Associate, Centre for the Study of African Economies, University of Oxford

This article was originally published on The Conversation. Read the original article.

Why Do We Post? The Impact Of Social Media on Society

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Pixabay

There is a lot of information out there and most of it is on social media. People are making excellent use of it to create jobs, business opportunities or even  for marketing purposes to reach target audiences, build brands etc. On the fun side (or not), It can be hard to ignore some of the popular ‘Social Media Posting Trends’ such as  selfies, gifs, emojis, bite-sized videos, etc which  keep some of us guessing, wanting more or even get us a little angry angry!

But why do people post on social media? What are their motives?  And do people think of the possible consequences whenever they post on social media sites?

A recent study, “Why We Post” published by nine anthropologists,  led by Daniel Miller of University College, London  highlights  some interesting discoveries about why people post and how those messages are perceived across the world.

First of all, whenever many people talk about ‘social media’ these days, they tend to connect that  with information posted on sites like Facebook, Twitter, Snapchat, Instagram,etc.  But what really is social media? And what counts as social media?  There are many definitions out there, but the anthroplogists define it as technology that affords ‘scalable sociality”. On their blog, they explain why they call it ‘scalable sociality and how it has scaled down from public broadcast.

Indeed social media has expanded over the last years and has allowed billions of users globally to make it  part of their lives. To get a broad picture, check out the following info graphic, the Conversation Prism  which was developed by Brian Solis a digital analyst and anthropologist. The graphic captures the state of social media and how important is in our  professional and consumers lives.

 

From their study, the in- depth analysis reveals how local populations in different countries behave and interact across social media and how these platforms and the content posted are impacting our daily lives. The participants, who worked independently for 15 months at locations in Brazil, Britain, Chile, China (one rural and one industrial site), India, Italy, Trinidad and Tobago, and Turkey, embedded themselves within families and their surrounding communities to successfully complete these tasks.

Their findings about the number  of social media users, indeed confirms  what most of us assume we already know-

Almost everyone we know uses social media!

 In fact, according to statistics by the year 2017,more than 2 billion or one in three people, will be using social media globally. And with all the technology advances and easy access to information there is no doubt that social media just keeps getting better and people love it!  As a matter of fact, as users continue to grow, the idea and possibility of posting on social media is helping  thousands of individuals and organisation to figure out ideal ways to create trends and develop best practices about what and how information should be shared online.

From their website, a number of  discoveries have been highlighted. Some of them are quite surprising facts and others are a confirmation about what most of us have been suspecting, known or assumed all this time.

For example-

Social Media and Education

It’s true, that a large number of youths including kids, spend a lot of their time on social media. So it’s no wonder that many of us are likely to hear parents and teacher talk about the negativity social media, associating it with destroying educational systems or contributing to poor perfomance in schools.

But that’s really not the case- The study revealed quite the opposite!

Infact,Social media does not detract from education – it is education‘.

Of course that depends on how you choose to look at the use of social media in relations to education.  In poor economies for example,  most children with limited access to formal schooling turn to YouTube videos as an important source of education.  This is also the case with industrial workers or job seekers who with little or no formal education also turn to social media to sharpen career skills.

Use of Memes

Another interesting discovery was the use of memes!

They are the ‘moral police of online life’.

 I agree that not only are they humourous (at times), but they also they promote values. I remember that “Be like Bill” 0nline stick figure that was notoriously all over facebook. What’s more interesting is the fact that people have taken memes seriously  and are now using it as a voice to express their complex feelings or make comment about certain issues within their communities. One interesting example i came across on the web was the Spoilt Modern Indian Woman, where memes  are not only hilarious but also calling out sexism and highlight misogyny in Indian society.

 

Indian Woman.png

Facebook.com/spoiltmodernwoman

 

Gender relations using fake accounts

This discovery left me quite amazed. Using fake accounts can go two ways. Either positively or negatively. With all the discrimination many face today, people have their own reasons to use fake profiles or just stay anonymous. For example, in some communities, especially in countries like China and Turkey, their results show that using  fake profiles accounts can infact help boost a career, foster business and community relationships . On a more personal level, a fake account can be more useful especially in some communites, such as Chile, where hiding sexual preferences or orientation  might be the case because not every is bold enough to ‘come out of the closet‘.

Their study also highlighted the importance of romance on facebook and how people want to express their love. Other than that, we also know that nowadays, people are finding love on social media.

However, my greatest concern concerning the issue of fake profiles has been safety! it gets’s scary if you or someone you know has been a victim of ‘Catfish’. People are now turning social media into a home of crimes. Catfishing is an epidemic no doubt about that!  Personally, i’ve seen people (actually fraudsters), using fake profiles to ask for money or lie about love or even make friends with the intention of turning that into into a love affair, or even commit God knows what kinds of crime!-If you have watched those Catfish episodes, then you definitely know something is seriously wrong with some people. The basic formular is always the same- Upload a photo, (if need be a  fake hot photos ) and you can catfish people.

Read all about the discoveries here.

Since their launch on the 29th February, the first three open access books  in the Why We Post series have been  downloaded over 6,000 times.