What accelerates industry value added in middle-income countries: is there a differential impact in low-income countries?

Abstract

This study determines whether macroeconomic factors such as gross capital formation, infrastructure development, household consumption expenditure, bank credit, labour force, foreign direct investment, trade openness and political stability/absence of violence and terrorism that accelerate industry value added in middle-income countries have differential impact in low-income countries. Employing panel fully modified ordinary least square (FMOLS) and generalised method of moments (GMM) in a sample of 25 low-income and 25 middle-income countries covering period of 1985–2018, the result showed that infrastructure development and foreign direct investment accelerated industry value added in middle-income countries but have differential impact in low-income countries. However, there was no differential impact in terms of other variables under consideration. But combining the two income groups, the result showed that only gross capital formation, household consumption expenditure, labour force and trade openness accelerate industry value added in low-and middle-income countries while other factors were insignificant.

Keywords:

• Industrialisation
• industry value added
• low-income countries
• middle-income countries
• macroeconomic factors

Disclosure statement

No potentialconflict of interest was reported by the author(s).

Additional information

Notes on contributors

Chukwuebuka Bernard Azolibe

Chukwuebuka Bernard Azolibe is a graduate teaching/research assistant in the Department of Banking and Finance, Nnamdi Azikiwe University Awka, Nigeria. His research interests include development economics, international economics, financial economics, and public finance.