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Development Strategy, Viability, and Economic Convergence

  • Justin Yifu Lin

The paper argues that an economy's industry/technology structure is endogenously determined by the economy's endowment structure. For the convergence to occur, the government of an LDC should target the upgrading of endowment structure instead of the industry/technology structure in its development strategy. If the government chooses to pursue an industry/technology structure, which is inconsistent with the comparative advantage determined by the economy's endowment structure, the firms in the government's priority sectors will be nonviable and the government needs to suppress the function of market and distort all kinds of prices as a way to protect the nonviable firms. Convergence will fail to occur as a result. Regression results from cross-country panel data are consistent with the predictions of the above arguments.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp409.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 409.

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Length: pages
Date of creation: 01 Oct 2001
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Handle: RePEc:wdi:papers:2000-409
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