Marshallian externality, industrial upgrading, and industrial policies
A growth model with multiple industries is developed to study how industries evolve as capital accumulates endogenously when each industry exhibits Marshallian externality (increasing returns to scale) and to explain why industrial policies sometimes succeed but sometimes fail. The authors show that, in the long run, the laissez-faire market equilibrium is Pareto optimal when the time discount rate is sufficiently small or sufficiently large. When the time discount rate is moderate, there exist multiple dynamic market equilibria with diverse patterns of industrial development. To achieve Pareto efficiency, it would require the government to identify the industry target consistent with the comparative advantage and to coordinate in a timely manner, possibly for multiple times. However, industrial policies may make people worse off than in the market equilibrium if the government picks an industry that deviates from the comparative advantage of the economy.
|Date of creation:||01 Sep 2011|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-791, October.
- Kiminori Matsuyama, 1991.
"Increasing Returns, Industrialization, and Indeterminacy of Equilibrium,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 106(2), pages 617-650.
- Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Aditya Bhattacharjea, 2003. "Book Review: Kicking away the Ladder: Development Strategy in Historical Perspective," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 38(1), pages 126-129, January.
- Vandana Chandra, 2006. "Technology, Adaptation, and Exports : How Some Developing Countries Got It Right," World Bank Publications, The World Bank, number 7118, September.
- Howard Pack & Kamal Saggi, 2006. "Is There a Case for Industrial Policy? A Critical Survey," World Bank Research Observer, World Bank Group, vol. 21(2), pages 267-297.
- Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
- Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2015. "Endowment structures, industrial dynamics, and economic growth," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 244-263.
- Ju, Jiandong & Lin, Justin Yifu & Wang, Yong, 2009. "Endowment structures, industrial dynamics, and economic growth," Policy Research Working Paper Series 5055, The World Bank.
- Yong Wang & Justin Yifu Lin & Jiandong Ju, 2010. "Endowment Structure, Industrial Dynamics, and Economic Growth," 2010 Meeting Papers 679, Society for Economic Dynamics.
- Andrew Mold, 2003. "Kicking away the ladder: development strategy in historical perspective by HA-JOON CHANG. (London: Anthem Press, 2002, pp. 187)," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(5), pages 668-670.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
- Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
- Ohashi, Hiroshi, 2005. "Learning by doing, export subsidies, and industry growth: Japanese steel in the 1950s and 1960s," Journal of International Economics, Elsevier, vol. 66(2), pages 297-323, July.
- Hiroshi Ohashi, 2004. "Learning by Doing, Export Subsidies, and Industry Growth: Japanese Steel in the 1950s and 1960s," CIRJE F-Series CIRJE-F-280, CIRJE, Faculty of Economics, University of Tokyo.
- Rodriguez-Clare, Andres, 2007. "Clusters and comparative advantage: Implications for industrial policy," Journal of Development Economics, Elsevier, vol. 82(1), pages 43-57, January.
- Andrés Rodríguez-Clare, 2005. "Clusters and Comparative Advantage: Implications for Industrial Policy," IDB Publications (Working Papers) 6830, Inter-American Development Bank.
- Andrés Rodríguez-Clare, 2005. "Clusters and Comparative Advantage: Implications for Industrial Policy," Research Department Publications 4391, Inter-American Development Bank, Research Department.
- Panagariya, Arvind, 1986. "Increasing returns, dynamic stability, and international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 43-63, February.
- Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5796. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.