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Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies

Author

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  • Su, Dan

    (Asian Development Bank Institute)

  • Yao, Yang

    (Asian Development Bank Institute)

Abstract

This paper revisits the role of the manufacturing sector during the middle-income stage. By exploiting a large dataset that covers internationally comparable sectoral information, we prove that the manufacturing sector is imbued with three important characteristics. First, for middle-income economies, manufacturing pulls along services, instead of the other way around. A decline in the manufacturing sector growth rate will negatively affect the growth rate of the services sector, in both the short-run and long-run meanings. Second, we show that manufacturing development not only promotes the incentives of savings, but also accelerates the pace of technological accumulation. Third, an increased share of the manufacturing sector in middle-income economies can enhance the utilization of human capital and economic institutions. Our empirical findings indicate that the manufacturing sector is still the key engine of economic growth for middle-income economies.

Suggested Citation

  • Su, Dan & Yao, Yang, 2016. "Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies," ADBI Working Papers 573, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0573
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    Cited by:

    1. Su, Dan & Yao, Yang, 2016. "Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies," ADBI Working Papers 573, Asian Development Bank Institute.
    2. repec:taf:rjapxx:v:22:y:2017:i:1:p:47-70 is not listed on IDEAS
    3. Haraguchi, Nobuya & Cheng, Charles Fang Chin & Smeets, Eveline, 2017. "The Importance of Manufacturing in Economic Development: Has This Changed?," World Development, Elsevier, vol. 93(C), pages 293-315.

    More about this item

    Keywords

    manufacturing sector; middle-income status; middle-income economies; empirical research; dataset; economic growth; growth engine; services; savings; technological accumulation; human capital; economic institutions;

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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