Leading Dragon Phenomenon: New Opportunities for Catch-Up in Low-Income Countries

Asian Development Review, vol. 30, no. 1, pp. 52–84

33 Pages Posted: 11 Apr 2015

See all articles by Vandana Chandra

Vandana Chandra

affiliation not provided to SSRN

Justin Y. Lin

Peking University - China Center for Economic Research

Yan Wang

George Washington University

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2013

Abstract

Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy. Since the 18th century, all countries that industrialized successfully have followed their comparative advantages and leveraged the latecomer advantage, including emerging market economies such as the People's Republic of China (PRC), India, and Indonesia. The current view is that Chinese dominance in manufacturing hinders poor countries from developing similar industries. We argue that rising labor cost is causing the PRC to graduate from labor-intensive to more capital-intensive and technology-intensive industries. This will result in the relocation of low-skill manufacturing jobs to other low-wage countries. This process, which we call the “leading dragon phenomenon,” offers an unprecedented opportunity to low-income countries. Such economies can seize this opportunity by attracting the rising outward foreign direct investment flowing from Brazil, the PRC, India, and Indonesia into the manufacturing sectors. All low-income countries can compete for the jobs spillover from the PRC and other emerging economies, but the winner must implement credible economic development strategies that are consistent with its comparative advantage.

Keywords: structural transformation, Asia, Africa, People's Republic of China, flying geese

JEL Classification: B10, O10, O14, O25

Suggested Citation

Chandra, Vandana and Lin, Justin Yifu and Wang, Yan, Leading Dragon Phenomenon: New Opportunities for Catch-Up in Low-Income Countries (April 1, 2013). Asian Development Review, vol. 30, no. 1, pp. 52–84, Available at SSRN: https://ssrn.com/abstract=2592037

Vandana Chandra (Contact Author)

affiliation not provided to SSRN

Justin Yifu Lin

Peking University - China Center for Economic Research ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Yan Wang

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
323
PlumX Metrics