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industrialization

What Industrial Policy?

Keijiro Otsuka's picture

Recently, economists began proposing the strategy for industrial development in low-income countries.  But there are few explicit recommendations as to what role governments should play in fostering industrialization.  Related question is whether we can draw useful lessons from successful experience of industrial development in East Asia for other regions, such as sub-Saharan Africa (SSA).

The paper entitled “A Cluster-Based Industrial Development Policy for Low-Income Countries” (Policy Research Working Paper 5703) proposes an industrial policy consisting of four pillars of recommendations based on roughly 20 case studies of industrial clusters in Asia and sub-Saharan Africa.

Flying Geese, leading dragons and Africa’s potential

Justin Yifu Lin's picture

The “flying geese” pattern describes the sequential order of the catching-up process of industrialization of latecomer economies.The potential for expanding the industrial sectors of African countries is substantial – this was a message I delivered on a recent trip to Italy, Tanzania, Mozambique and Malawi. This can happen through an improved understanding of the mechanics of economic transformation as well as by focusing on how such countries can follow their comparative advantage in natural resources and labor supply. 

During my site visits and meetings with the private sector for the African segments of my trip, I became more convinced than ever of the strong untapped potential for private sector-led industrialization. Yet that can only happen when the government plays a facilitating role, such as by overcoming information asymmetries, coordination failures and externalities associated with first-mover actions. In Tanzania, initial experiments with industrial parks look promising, as do agricultural development projects and rural transport initiatives currently under way. In the case of industrial parks, it’s important to have a one-stop shop for registration and other administrative obligations, adequate electricity and water supply, and good transport/logistics links.

China’s Special Economic Zones and Industrial Clusters: Success and Challenges

Douglas Zhihua Zeng 曾智华's picture

In the past 30 years, China has achieved phenomenal economic growth, an unprecedented development “miracle” in human history. Since the institution of its reforms and Open Door policy in 1978, China’s gross domestic product (GDP) has been growing at an average annual rate of more than 9 percent (figure 1). In 2010, it has surpassed that of Japan and become the world’s second-largest economy.

Underutilization of capacity and Ricardian equivalence

Justin Yifu Lin's picture

In a recent blog post “Ricardian Confusions”, Paul Krugman commented on my paper “Beyond Keynesianism and the New New Normal” delivered at the Council on Foreign Relations on Feb. 28. He points out that the government’s fiscal stimulus generally is temporary and households will not increase savings by the full amount of the stimulus. As a result, the stimulus is expansionary even if Ricardian equivalence holds. His comment triggered a series of discussions (Antonio Fatas and Ilian Mihov, Mark Thoma, Paul Krugman, Nick Rowe, and Brad Delong).  
 
I have no disagreement with Paul about the possibility of an expansionary effect of a temporary fiscal stimulus. But if the effect exists and the stimulus does not increase productivity as in his example, there will also be a contractionary effect after the exit of stimulus and the increase of tax to retire the public debts. At the end the issue of underutilization of capacity, which my paper attempts to address, will still be there. 

China's secret weapon in light manufacturing: Small and Medium Enterprise-oriented "Plug and Play" industrial zones

Vincent Palmade's picture

 

Light manufacturing operations in a Chinese standardized factory building
  Light manufacturing operations in a Chinese standardized factory building
The success of Chinese manufacturing growth in recent decades is indisputable and has irrevocably shifted the global landscape for manufacturing competitiveness. In contrast, manufacturing in Sub -Saharan Africa has failed to deliver broad-based growth and poverty reduction on anything close to the scale as has been observed in East Asia. As countries, such as China and Vietnam, look to upgrade technology and move up the value-chain, there may be an opportunity for Africa to become competitive in the low-technology, labor-intensive light manufacturing sectors and enter the global manufacturing supply chain.

India's Service Revolution

Ejaz Ghani's picture

The post on 'Understanding India and China's success' is a nice summary of Professor Bardhan's key messages of ‘Awakening Giants, Feet of Clay: A China-India Comparative Economic Assessment.’ It debunks many myths, but it can not debunk an emerging trend that industrialization is no longer the only route to rapid growth and development".

I am sharing below a blog post I wrote for the Project Syndicate as well as a video of a panel discussion I participated in at the CATO Institute.  Happy to hear from readers.

From Project Syndicate:

 Click here to download the book (pdf).

China and India are both racing ahead economically. But the manner in which they are growing is dramatically different. Whereas China is a formidable exporter of manufactured goods, India has acquired a global reputation for exporting modern services. Indeed, India has leapfrogged over the manufacturing sector, going straight from agriculture into services.

The differences in the two countries’ growth patterns are striking, and raise significant questions for development economists. Can service be as dynamic as manufacturing? Can late-comers to development take advantage of the increasing globalization of the service sector? Can services be a driver of sustained growth, job creation, and poverty reduction?