Public Policy and Industrial Transformation in the Process of Development
This paper studies the role of public policy in promoting industrial transformation from an imitationbased, low-skill economy to an innovation-based, high-skill economy, where technological progress now occurs through the domestic invention of idea...
| Main Authors: | , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/04/17558108/public-policy-industrial-transformation-process-development http://hdl.handle.net/10986/14443 |
| Summary: | This paper studies the role of public
policy in promoting industrial transformation from an
imitationbased, low-skill economy to an innovation-based,
high-skill economy, where technological progress now occurs
through the domestic invention of ideas. Industrial
transformation is measured by changes in an index of
industrial structure, defined as the ratio of the variety of
imitation- to innovation-based intermediate goods. A key
mechanism through which productivity increases initially in
both the imitation and innovation sectors is through a
knowledge externality associated with learning by doing in
the imitation sector. The process of industrialization
increases the demand for high-skill labor, inducing
individuals to invest in education. The model also
emphasizes the distinction between basic or core
infrastructure, which promotes imitation, and advanced
infrastructure, which promotes innovation. A calibrated
version for a low-income country is used to perform several
policy experiments, including an increase in investment in
infrastructure, a reduction in the cost of training, and
improved enforcement of property rights. |
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