Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change
35 Pages Posted: 20 Apr 2016
Date Written: January 1, 2011
Abstract
Active economic policies by developing countries? governments to promote growth and industrialization have generally been viewed with suspicion by economists, and for good reasons: past experiences show that such policies have too often failed to achieve their stated objectives. But the historical record also indicates that in all successful economies, the state has always played an important role in facilitating structural change and helping the private sector sustain it across time. This paper proposes a new approach to help policymakers in developing countries identify those industries that may hold latent comparative advantage. It also recommends ways of removing binding constraints to facilitate private firms? entry into those industries. The paper introduces an important distinction between two types of government interventions. First are policies that facilitate structural change by overcoming information and coordination and externality issues, which are intrinsic to industrial upgrading and diversification. Such interventions aim to provide information, compensate for externalities, and coordinate improvements in the "hard" and "soft" infrastructure that are needed for the private sector to grow in sync with the dynamic change in the economy?s comparative advantage. Second are those policies aimed at protecting some selected firms and industries that defy the comparative advantage determined by the existing endowment structure?either in new sectors that are too advanced or in old sectors that have lost comparative advantage.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
New Structural Economics: A Framework for Rethinking Development
-
Development Strategy, Viability, and Economic Distortions in Developing Countries
By Justin Y. Lin and Feiyue Li
-
The Growth Report and New Structural Economics
By Justin Y. Lin and Celestin Monga
-
FDI from BRICs to LICs: Emerging Growth Driver?
By Misa Takebe and Montfort Mlachila
-
By Manuel R. Agosin, Christian Larrain, ...
-
Post-Macroeconomics - Reflections on the Crisis and Strategic Directions Ahead
-
The Contribution of Chinese FDI to Africa's Pre Crisis Growth Surge
By Aaron Weisbrod and John Whalley