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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.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6405.

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Date of creation: 01 Apr 2013
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Handle: RePEc:wbk:wbrwps:6405

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Related research

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

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References

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  1. Christian Lorenczik & Monique Newiak, 2010. "Imitation and Innovation Driven Development under Imperfect Intellectual Property Rights," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c015_056, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Perez-Sebastian, Fidel, 2007. "Public support to innovation and imitation in a non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(12), pages 3791-3821, December.
  3. Iacopetta, Maurizio, 2010. "Phases of economic development and the transitional dynamics of an innovation-education growth model," European Economic Review, Elsevier, Elsevier, vol. 54(2), pages 317-330, February.
  4. Colin Davis, 2013. "Regional integration and innovation offshoring with occupational choice and endogenous growth," Journal of Economics, Springer, Springer, vol. 108(1), pages 59-79, January.
  5. Agenor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2005. "Roads out of poverty? assessing the links between aid, public investment, growth, and poverty reduction," Policy Research Working Paper Series 3490, The World Bank.
  6. German Cubas, 2010. "Accounting for Cross-Country Income Differences with Public Capital," Documentos de Trabajo (working papers), Department of Economics - dECON 3410, Department of Economics - dECON.
  7. Andersen, Thomas Barnebeck & Dalgaard, Carl-Johan, 2013. "Power outages and economic growth in Africa," Energy Economics, Elsevier, Elsevier, vol. 38(C), pages 19-23.
  8. Crespi, Gustavo & Zuniga, Pluvia, 2012. "Innovation and Productivity: Evidence from Six Latin American Countries," World Development, Elsevier, Elsevier, vol. 40(2), pages 273-290.
  9. Sequeira, Tiago Neves, 2008. "R&D Spillovers in an Endogenous Growth Model with Physical Capital, Human Capital and Varieties," FEUNL Working Paper Series wp532, Universidade Nova de Lisboa, Faculdade de Economia.
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Cited by:
  1. Pierre-Richard Agénor & Hinh T. Dinh, 2013. "From Imitation to Innovation : Public Policy for Industrial Transformation," World Bank Other Operational Studies 17024, The World Bank.

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