Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies

65 Pages Posted: 26 May 2016 Last revised: 19 Nov 2016

See all articles by Dan Su

Dan Su

Cheung Kong Graduate School of Business

Yang Yao

Peking University

Date Written: May 24, 2016


This paper revisits the role of the manufacturing sector during the middle-income stage. By exploiting a large dataset that covers internationally comparable sectoral information, we prove that the manufacturing sector is imbued with three important characteristics. First, for middle-income economies, manufacturing pulls along services, instead of the other way around. A decline in the manufacturing sector growth rate will negatively affect the growth rate of the services sector, in both the short-run and long-run meanings. Second, we show that manufacturing development not only promotes the incentives of savings, but also accelerates the pace of technological accumulation. Third, an increased share of the manufacturing sector in middle-income economies can enhance the utilization of human capital and economic institutions. Our empirical findings indicate that the manufacturing sector is still the key engine of economic growth for middle-income economies.

Keywords: manufacturing sector, middle-income status, middle-income economies, empirical research, dataset, economic growth, growth engine, services, savings, technological accumulation, human capital, economic institutions

JEL Classification: L16, O14, O47

Suggested Citation

Su, Dan and Yao, Yang, Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies (May 24, 2016). ADBI Working Paper 573, Available at SSRN: or

Dan Su (Contact Author)

Cheung Kong Graduate School of Business ( email )

1 East Chang'an Street
Beijing, 100738

Yang Yao

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871

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