Development Strategy, Optimal Industrial Structure and Economic Growth in Less Developed Countries

Justin Lin () and Pengfei Zhang

Development Economics Working Papers from East Asian Bureau of Economic Research

Abstract: In this paper, we develop an endogenous growth model that combines structural change with repeated product improvements. There are two sectors in the present paper, one is traditional sector, and the other is modern sector. The technological progress in the traditional sector takes the form of horizontal innovation based on expanding variety, while the technologies in the modern sector become not only increasingly capital-intensive but also progressively productive over time. The application of the basic model to the less developed economies show that the optimal industrial structure in the less developed countries (LDCs) is endogenously determined by its factor endowments; the firm in the LDCs that enters the capital-intensive, advanced industry in the developed countries (DCs) would be nonviable owing to the relative scarcity of capital in the LDCs factor endowments; whether the industrial structure matches with the factor endowment structure or not is the fundamental cause to explain differences in economic performance among the LDCs.

Keywords: Capital Intensity; Development Strategy; Factor Endowments; Endogenous Growth; Industrial Structure; productivity; technology; Viability (search for similar items in EconPapers)
JEL-codes: D24 O11 O14 O30 O40 O41 (search for similar items in EconPapers)
Date: 2007-01
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Citations: View citations in EconPapers (3)

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Working Paper: Development Strategy, Optimal Industrial Structure and Economic Growth in Less Developed Countries (2007)
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