Industrial Development: Stylized Facts and Policies

This paper reviews recent empirical evidence that places industrial development and non-traditional manufactures in particular, in the driving seat of economic growth and development. This empirical work has generated some new stylized facts and has greatly increased our understanding of how manufacturing contributes to economic growth. The first half of the paper is devoted to discussing these stylized facts. The second half of the paper presents a policy discussion around a barebones general equilibrium model. The model is informed by the empirical evidence discussed in the first half of the paper and is built on a general learning spillover generated in the modern sector. It highlights the respective roles played in industrialization of three kinds of economic policies: trade liberalization, promotion of non-traditional exports, and current-account policies (including, critically, the exchange rate). The objective here is to move beyond specific industrial policies of the type discussed in Rodrik (2004) to a consideration of how the challenge of industrialization affects the stance of external policies more broadly.

  • Authors: Dani Rodrik
  • Year: 2006
  • Organisation: Harvard University
  • Publisher: UN-DESA
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