Growth Identification and Facilitation : The Role of the State in the Dynamics of Structural Change

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.

Bibliographic Details

Main Authors:	Monga, Celestin, Lin, Justin Yifu
Language:	English
Published:	2010-05-01
Subjects:	ADVANCED COUNTRIES, ADVANCED ECONOMIES, AGGREGATE LEVEL, AGRICULTURE, BENCHMARK, BINDING CONSTRAINTS, BUSINESS DEVELOPMENT, CAPITAL ACCUMULATION, CAPITAL GOODS, CAPITAL INTENSITY, CAPITAL INVESTMENT, CARBON, CHEMICAL FERTILIZERS, COAL, COMMUNICATION TECHNOLOGIES, COMPARATIVE ADVANTAGE, COMPARATIVE ADVANTAGES, COMPETITIVE MARKET, COMPETITIVE MARKETS, COMPETITIVENESS, COST OF CAPITAL, COUNTRY REGRESSIONS, CROSS-COUNTRY PERSPECTIVE, DEBT, DECISION TREE, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING WORLD, DEVELOPMENT AGENCIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, DEVELOPMENT STRATEGY, DISEQUILIBRIUM, DIVERSIFICATION, DOMESTIC INDUSTRIES, DOMESTIC SAVINGS, ECONOMETRIC MODELING, ECONOMIC CHANGE, ECONOMIC CRITERIA, ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENTS, ECONOMIC EFFECTS, ECONOMIC GROWTH, ECONOMIC HISTORIANS, ECONOMIC IMPACT, ECONOMIC POLICIES, ECONOMIC POWERHOUSES, ECONOMIC PROGRAMS, ECONOMIC SECTORS, ECONOMIC THEORY, ECONOMIES OF SCALE, ECONOMISTS, EFFICIENT MARKET, EFFICIENT MARKETS, ELASTICITY, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMPIRICAL EVIDENCE, EMPIRICAL STUDIES, ENVIRONMENTAL, ENVIRONMENTAL PROTECTION, EXCHANGE RATE, EXPORT PROMOTION, EXPORTS, EXTERNALITIES, EXTERNALITY, FACTOR ENDOWMENTS, FACTOR PRICES, FACTORS OF PRODUCTION, FAILURE OF STATE, FINANCE CORPORATION, FINANCIAL MARKETS, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FISHING, FOREIGN EXCHANGE, FOREIGN FIRMS, FORESTRY, FREE TRADE, FULL EMPLOYMENT, FUTURE GROWTH, GDP, GOVERNMENT ACTION, GOVERNMENT INTERVENTION, GOVERNMENT INTERVENTIONS, GOVERNMENT SUBSIDIES, GROSS DOMESTIC PRODUCT, GROWTH LITERATURE, GROWTH POTENTIAL, GROWTH PROCESS, GROWTH RATE, GROWTH RATES, GROWTH THEORY, HIGH UNEMPLOYMENT, HUMAN CAPITAL, INCOME, INCOME DISTRIBUTION, INCOME ELASTICITY, INCOME GROWTH, INCOME GROWTH RATE, INCOME LEVELS, INDIVIDUAL COUNTRIES, INDIVIDUAL FARMERS, INDIVIDUAL FIRM, INDIVIDUAL FIRMS, INDUSTRIAL DEVELOPMENT, INDUSTRIAL POLICY, INDUSTRIALIZATION, INFANT INDUSTRY ARGUMENT, INFORMATION ASYMMETRY, INFRASTRUCTURE REQUIREMENTS, INTANGIBLE, INTELLECTUAL PROPERTY, INTEREST RATE, INTERMEDIATE INPUTS, INTERNATIONAL TRADE, INVESTMENT CLIMATE, INVESTMENT DECISIONS, LABOR COSTS, LABOR FORCE, LEGAL FRAMEWORK, LIVING STANDARDS, LOW-INCOME COUNTRIES, LOW-INCOME COUNTRY, MACROECONOMIC MANAGEMENT, MACROECONOMIC POLICY, MACROECONOMICS, MANUFACTURING INDUSTRIES, MARGINAL COST, MARKET ECONOMIES, MARKET FAILURES, MARKET MECHANISM, MARKET SHARES, MICROECONOMIC ANALYSES, MONOPOLY, MORAL RESPONSIBILITY, NATIONAL DEVELOPMENT, NATIONAL ECONOMY, NATURAL MONOPOLIES, NATURAL RESOURCES, OUTPUTS, PATENTS, PER CAPITA INCOME, PER CAPITA INCOMES, PLANNED ECONOMIES, POLICY DISCUSSION, POLICY INSTRUMENTS, POLICY INTERVENTIONS, POLICY MEASURES, POLICY OPTIONS, POLICY PAPERS, POLICY RESEARCH, POLICY VARIABLES, POLITICAL ECONOMY, POLITICAL INSTABILITY, POLITICAL SUPPORT, POOR COUNTRIES, POVERTY REDUCTION, POWER PARITY, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRIVATE MARKET, PRIVATE SECTOR GROWTH, PRIVATIZATION, PRODUCTION COSTS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROPERTY RIGHTS, PUBLIC DEBT, PUBLIC GOODS, PUBLIC SECTOR, PUBLIC-PRIVATE PARTNERSHIPS, PURCHASING POWER, RATE OF INVESTMENT, RATE OF RETURN, REGRESSION ANALYSES, REGULATORY REQUIREMENTS, RENT SEEKING, SCARCE CAPITAL, SHADOW PRICES, SKILLED WORKERS, SMALL BUSINESSES, SMALL ENTERPRISES, SOCIAL CAPITAL, STATE ENTERPRISES, STATE INTERVENTION, STATE INTERVENTIONS, STATE-OWNED ENTERPRISES, STRUCTURAL CHANGE, SUSTAINABLE GROWTH, TAX, TAX CREDITS, TECHNOLOGICAL CHANGE, TECHNOLOGICAL INNOVATION, TECHNOLOGY TRANSFER, TELECOMMUNICATIONS, TRADE POLICY, TRANSACTION COSTS, UNEMPLOYMENT, UNSKILLED LABOR, URBAN AREAS, WEALTH, WEALTH CREATION, WORKING CAPITAL, WORLD ECONOMIES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100518154747 https://hdl.handle.net/10986/3798
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