Catch-Up Growth and Inter-industry Productivity Spillovers: Evidence from Trade Data.

This paper investigates the conditions under which export-led growth is effective for developing countries by estimating the role of inter-industry productivity spillovers—productivity gains transmitted across sectors through shared occupational labor groups—in driving export-led growth. Using a quantitative trade model applied to four decades of bilateral trade data (1962–2000) and occupational task data, the study finds that productivity spillovers are significant and notably larger in skill-intensive sectors, particularly high-skilled manufacturing, while being minimal in agriculture and low-skilled sectors. The results suggest that poorer countries with an initial comparative advantage in manufacturing benefit most from export-led growth by reallocating labor toward sectors with high spillovers, leveraging foreign demand from richer countries. Counterfactual analyses indicate that these spillovers contribute to the slow convergence of labor productivity between developing and advanced economies and that dynamic gains from trade are substantial but vary depending on a country's initial export structure. The paper highlights the importance of sectoral specialization and occupational composition in understanding heterogeneous growth outcomes across developing countries without asserting a specific micro-level mechanism for the spillovers.