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Public policy and industrial transformation in the process of development

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  • Agenor, Pierre-Richard
  • Dinh, Hinh T.

Abstract

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.

Suggested Citation

  • Agenor, Pierre-Richard & Dinh, Hinh T., 2013. "Public policy and industrial transformation in the process of development," Policy Research Working Paper Series 6405, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6405
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    Cited by:

    1. Sun, Yajie & Liao, Wen-Chi, 2021. "Resource-Exhausted City Transition to continue industrial development," China Economic Review, Elsevier, vol. 67(C).
    2. Ching T. Liao, 2022. "Skill improvement by product imitation," Small Business Economics, Springer, vol. 58(3), pages 1563-1577, March.
    3. Pierre-Richard AGENOR, 2016. "Caught in the Middle? The Economics of Middle-Income Traps," Working Papers P142, FERDI.
    4. Gnangnon, Sèna Kimm, 2023. "Has the Least developed countries' TRIPS Waiver Delivered on its Promise of Creating a Viable Technological Base?," EconStor Preprints 275666, ZBW - Leibniz Information Centre for Economics.
    5. Pierre‐Richard Agénor & Barış Alpaslan, 2018. "Infrastructure And Industrial Development With Endogenous Skill Acquisition," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 313-334, October.
    6. King Yoong Lim, 2017. "Assessing The Double-Edged Sword Of Using Imitation As A Stepping Stone To Innovation: A Case Of Malaysia’S K-Economy Puzzle," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(01), pages 131-159, November.
    7. Pierre-Richard Agénor, 2017. "Caught In The Middle? The Economics Of Middle-Income Traps," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 771-791, July.
    8. Lim, King Yoong, 2019. "Industrial Transformation With Heterogeneous Labor And Foreign Experts," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3225-3266, December.
    9. Agénor, Pierre-Richard & Dinh, Hinh T., 2015. "Social capital, product imitation and growth with learning externalities," Journal of Development Economics, Elsevier, vol. 114(C), pages 41-54.
    10. Agenor, Pierre-Richard & Dinh, Hinh, 2013. "From Imitation to Innovation: Public Policy for Industrial Transformation," World Bank - Economic Premise, The World Bank, issue 115, pages 1-8, May.
    11. Hinh T. Dinh, 2017. "Jobs, Industrialization, and Globalization," Books & Reports, Policy Center for the New South, number 22, October.
    12. Gill,Indermit S. & Kharas,Homi, 2015. "The middle-income trap turns ten," Policy Research Working Paper Series 7403, The World Bank.
    13. repec:ocp:rpaper:rp-14/03 is not listed on IDEAS

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    Keywords

    Labor Policies; Economic Theory&Research; Political Economy; Debt Markets; Labor Markets;
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