Marshallian Externality, Industrial Upgrading, and Industrial Policies

Marshallian Externality, Industrial Upgrading, and Industrial Policies

A growth model with multiple industries is developed to study how industries evolve as capital accumulates endogenously when each industry exhibits Marshallian externality (increasing returns to scale) and to explain why industrial policies sometim...

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Bibliographic Details
Main Authors: Ju, Jiandong, Lin, Justin Yifu, Wang, Yong
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
COLLECTIVE ACTION
COMPARATIVE ADVANTAGE
COMPARATIVE ANALYSIS
COMPETITIVENESS
CONDITIONS
CONSUMERS
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT STRATEGIES
DEVELOPMENT STRATEGY
DISCOUNT RATE
DYNAMIC ANALYSES
ECONOMIC THEORY
EQUILIBRIA
EQUILIBRIUM
EXPORTS
EXTERNALITY
FREE MARKET ECONOMY
FUNCTIONAL FORMS
GDP
INCREASING RETURNS
INCREASING RETURNS TO SCALE
INDUSTRIAL DEVELOPMENT
INDUSTRIAL POLICIES
INDUSTRIAL POLICY
INDUSTRIALIZATION
INTERNATIONAL TRADE
MARGINAL PRODUCTIVITY
NASH EQUILIBRIUM
OPEN ACCESS
OPEN ECONOMY
PARETO EFFICIENCY
POLITICAL ECONOMY
PRODUCTION FUNCTION
PRODUCTIVITY GROWTH
RESOURCE ALLOCATION
STRUCTURAL CHANGE
UTILITY FUNCTION
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_20110913162136
http://hdl.handle.net/10986/3560
id okr-10986-3560
recordtype oai_dc
spelling okr-10986-35602021-04-23T14:02:10Z Marshallian Externality, Industrial Upgrading, and Industrial Policies Ju, Jiandong Lin, Justin Yifu Wang, Yong COLLECTIVE ACTION COMPARATIVE ADVANTAGE COMPARATIVE ANALYSIS COMPETITIVENESS CONDITIONS CONSUMERS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DISCOUNT RATE DYNAMIC ANALYSES ECONOMIC THEORY EQUILIBRIA EQUILIBRIUM EXPORTS EXTERNALITY FREE MARKET ECONOMY FUNCTIONAL FORMS GDP INCREASING RETURNS INCREASING RETURNS TO SCALE INDUSTRIAL DEVELOPMENT INDUSTRIAL POLICIES INDUSTRIAL POLICY INDUSTRIALIZATION INTERNATIONAL TRADE MARGINAL PRODUCTIVITY NASH EQUILIBRIUM OPEN ACCESS OPEN ECONOMY PARETO EFFICIENCY POLITICAL ECONOMY PRODUCTION FUNCTION PRODUCTIVITY GROWTH RESOURCE ALLOCATION STRUCTURAL CHANGE UTILITY FUNCTION A growth model with multiple industries is developed to study how industries evolve as capital accumulates endogenously when each industry exhibits Marshallian externality (increasing returns to scale) and to explain why industrial policies sometimes succeed but sometimes fail. The authors show that, in the long run, the laissez-faire market equilibrium is Pareto optimal when the time discount rate is sufficiently small or sufficiently large. When the time discount rate is moderate, there exist multiple dynamic market equilibria with diverse patterns of industrial development. To achieve Pareto efficiency, it would require the government to identify the industry target consistent with the comparative advantage and to coordinate in a timely manner, possibly for multiple times. However, industrial policies may make people worse off than in the market equilibrium if the government picks an industry that deviates from the comparative advantage of the economy. 2012-03-19T18:04:38Z 2012-03-19T18:04:38Z 2011-09-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110913162136 http://hdl.handle.net/10986/3560 English Policy Research working paper ; no. WPS 5796 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic COLLECTIVE ACTION
COMPARATIVE ADVANTAGE
COMPARATIVE ANALYSIS
COMPETITIVENESS
CONDITIONS
CONSUMERS
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT STRATEGIES
DEVELOPMENT STRATEGY
DISCOUNT RATE
DYNAMIC ANALYSES
ECONOMIC THEORY
EQUILIBRIA
EQUILIBRIUM
EXPORTS
EXTERNALITY
FREE MARKET ECONOMY
FUNCTIONAL FORMS
GDP
INCREASING RETURNS
INCREASING RETURNS TO SCALE
INDUSTRIAL DEVELOPMENT
INDUSTRIAL POLICIES
INDUSTRIAL POLICY
INDUSTRIALIZATION
INTERNATIONAL TRADE
MARGINAL PRODUCTIVITY
NASH EQUILIBRIUM
OPEN ACCESS
OPEN ECONOMY
PARETO EFFICIENCY
POLITICAL ECONOMY
PRODUCTION FUNCTION
PRODUCTIVITY GROWTH
RESOURCE ALLOCATION
STRUCTURAL CHANGE
UTILITY FUNCTION
spellingShingle COLLECTIVE ACTION
COMPARATIVE ADVANTAGE
COMPARATIVE ANALYSIS
COMPETITIVENESS
CONDITIONS
CONSUMERS
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT STRATEGIES
DEVELOPMENT STRATEGY
DISCOUNT RATE
DYNAMIC ANALYSES
ECONOMIC THEORY
EQUILIBRIA
EQUILIBRIUM
EXPORTS
EXTERNALITY
FREE MARKET ECONOMY
FUNCTIONAL FORMS
GDP
INCREASING RETURNS
INCREASING RETURNS TO SCALE
INDUSTRIAL DEVELOPMENT
INDUSTRIAL POLICIES
INDUSTRIAL POLICY
INDUSTRIALIZATION
INTERNATIONAL TRADE
MARGINAL PRODUCTIVITY
NASH EQUILIBRIUM
OPEN ACCESS
OPEN ECONOMY
PARETO EFFICIENCY
POLITICAL ECONOMY
PRODUCTION FUNCTION
PRODUCTIVITY GROWTH
RESOURCE ALLOCATION
STRUCTURAL CHANGE
UTILITY FUNCTION
Ju, Jiandong
Lin, Justin Yifu
Wang, Yong
Marshallian Externality, Industrial Upgrading, and Industrial Policies
geographic_facet The World Region
The World Region
relation Policy Research working paper ; no. WPS 5796
description A growth model with multiple industries is developed to study how industries evolve as capital accumulates endogenously when each industry exhibits Marshallian externality (increasing returns to scale) and to explain why industrial policies sometimes succeed but sometimes fail. The authors show that, in the long run, the laissez-faire market equilibrium is Pareto optimal when the time discount rate is sufficiently small or sufficiently large. When the time discount rate is moderate, there exist multiple dynamic market equilibria with diverse patterns of industrial development. To achieve Pareto efficiency, it would require the government to identify the industry target consistent with the comparative advantage and to coordinate in a timely manner, possibly for multiple times. However, industrial policies may make people worse off than in the market equilibrium if the government picks an industry that deviates from the comparative advantage of the economy.
format Publications & Research :: Policy Research Working Paper
author Ju, Jiandong
Lin, Justin Yifu
Wang, Yong
author_facet Ju, Jiandong
Lin, Justin Yifu
Wang, Yong
author_sort Ju, Jiandong
title Marshallian Externality, Industrial Upgrading, and Industrial Policies
title_short Marshallian Externality, Industrial Upgrading, and Industrial Policies
title_full Marshallian Externality, Industrial Upgrading, and Industrial Policies
title_fullStr Marshallian Externality, Industrial Upgrading, and Industrial Policies
title_full_unstemmed Marshallian Externality, Industrial Upgrading, and Industrial Policies
title_sort marshallian externality, industrial upgrading, and industrial policies
publishDate 2012
url http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110913162136
http://hdl.handle.net/10986/3560
_version_ 1764387210215292928

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