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Asia’s Industrial Transformation: The Role of Manufacturing and Global Value Chains (Part 1)

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  • Felipe, Jesus

    (Asian Development Bank)

Abstract

This paper argues that the single most important factor that explains East Asia’s development success was its fast structural transformation toward industrialization, manufacturing in particular. Workers moved out of agriculture into manufacturing, and the sector diversified and upgraded its structure. Manufacturing activities are subject to increasing returns to scale, and many manufacturing goods have high income elasticities of demand. For these reasons, manufacturing is referred to as the “engine of growth.” It is in the context of industrialization that openness played an important role in East Asia’s success, i.e., the connection between “export-led growth” (the relaxation of the balance-of-payments constraint on foreign exchange) and industrialization. Part 1 of the paper documents the extent of structural transformation in developing Asia. Second, it analyzes the relationship between the exportled growth model (i.e., the relaxation of the balance-of-payments constraint on foreign exchange) and industrialization. Finally, it reviews the industrialization experiences of Japan and the Republic of Korea, and discusses the recent deindustrialization debate.

Suggested Citation

  • Felipe, Jesus, 2018. "Asia’s Industrial Transformation: The Role of Manufacturing and Global Value Chains (Part 1)," ADB Economics Working Paper Series 549, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0549
    as

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    File URL: https://www.adb.org/publications/asias-industrial-transformation-manufacturing-gvcs-part1
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    References listed on IDEAS

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    1. Ute Pieper, 2000. "Deindustrialisation and the social and economic sustainability nexus in developing countries: Cross-country evidence on productivity and employment," Journal of Development Studies, Taylor & Francis Journals, vol. 36(4), pages 66-99.
    2. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    3. Marcel P. Timmer & Gaaitzen J. de Vries, 2009. "Structural change and growth accelerations in Asia and Latin America: a new sectoral data set," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 3(2), pages 165-190, June.
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    Cited by:

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    2. Huff, Gregg, 2024. "Vent-for-surplus in Southeast Asian development since 1870," World Development, Elsevier, vol. 181(C).

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    More about this item

    Keywords

    balance-of-payment constraint; deindustrialization; engine of growth; export-led growth; industrialization; manufacturing; structural transformation;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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