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 a...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| 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 http://hdl.handle.net/10986/3798 |
| Summary: | 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. |
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