Korea and the BICs (Brazil, India and China): Catching Up Experiences

43 Pages Posted: 20 Apr 2016

Date Written: October 1, 2009

Abstract

This paper tests a neo-Schumpeterian model with industry-level data to analyze how Brazil, India, and China are catching up with South Korea's technological frontier in a globalized world. The paper validates Aghion et al.'s inverted-U hypothesis that industries that are closer to the technological frontier innovate to escape competition while longer distances discourage innovating. It suggests that for effective catching up, distance-shortening (or innovation-enhancing) policies may be a necessary complement to liberalization. South Korea and China combined a variety of distance-shortening policies with financial subsidies to promote high tech industries and an export-led growth strategy. Post-liberalization, they leveraged swift competition to spur catch-up. In comparison, Brazil, which was as rich as South Korea, and India, which was as rich as China in 1980, are catching up more slowly. Import-substitution industrialization strategies saddled Brazil and India with a large anti-export bias, and unfocused attention to innovation-enhancing policies dampened global competitiveness. Post liberalization, many of their industries were too far behind the technological frontier to effectively benefit from competition. The catch-up experiences of Brazil, India, and China with South Korea illustrate that distance from the technological frontier matters and that the design of country-specific distance- shortening policies can be an important complement to trade liberalization in promoting catching up with richer countries.

Keywords: Labor Policies, Economic Theory & Research, Water and Industry, E-Business, Knowledge for Development

Suggested Citation

Osorio-Rodarte, Israel and Primo Braga, Carlos Alberto, Korea and the BICs (Brazil, India and China): Catching Up Experiences (October 1, 2009). World Bank Policy Research Working Paper No. 5101, Available at SSRN: https://ssrn.com/abstract=1498975

Israel Osorio-Rodarte (Contact Author)

World Bank ( email )

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Carlos Alberto Primo Braga

IMD ( email )

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Fundação Dom Cabral ( email )

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Brazil

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