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The Weak Link Theory of Economic Development

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  • Charles I. Jones

    (University of California, Berkeley)

Abstract

Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of 50. What explains these enormous differences? This paper returns to an old idea in development economics and proposes that complementarity and linkages are at the heart of the explanation. Just as a chain is only as strong as its weakest link, problems at any point in a production chain can reduce output substantially if inputs enter production in a complementary fashion. This paper builds a model with complementary inputs and links across sectors and shows that it can easily generate 50-fold aggregate income differences from plausible distributions of productivity in the underlying sectors.

Suggested Citation

  • Charles I. Jones, 2007. "The Weak Link Theory of Economic Development," Working Papers 042007, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:042007
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    References listed on IDEAS

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    2. Eifert, Benn & Gelb, Alan & Ramachandran, Vijaya, 2008. "The Cost of Doing Business in Africa: Evidence from Enterprise Survey Data," World Development, Elsevier, vol. 36(9), pages 1531-1546, September.

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