Comparative Advantage Defying Development Strategy and Cross Country Poverty Incidence

Abu Bakkar Siddique ()
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Abu Bakkar Siddique: KDI School of Public Policy and Management

Journal of Economic Development, 2016, vol. 41, issue 4, 45-78

Abstract: This paper argues that poverty in a country is endogenously determined by the country¡¯s long-term economic development strategy. It empirically examines the effects of adopting a Comparative Advantage-Defying (CAD) development strategy - which attempts to encourage economic actors to deviate from the economy¡¯s existing comparative advantages in their entry into an industry or choice of technology - on its level of poverty. This paper also examines how this effect of CAD differs with the level of an economy¡¯s financial development, which is the most important channel for the effects of CAD on poverty to manifest themselves. Data for the period of 1963 to 1999 (cross-section average over this time period) and 1980 to 2000 (panel with 5 years interval) for 113 countries are used in the analysis. We find that the more aggressively a country adopts CAD development strategy, the higher the level of poverty incidence. But a high level of financial development reduces the poverty-increasing impact of adopting CAD. The policy recommendation by this paper is to adopt Comparative Advantage-Following (CAF) development strategy, which facilitates the actors¡¯ entry into an industry according to the economy¡¯s existing comparative advantages, by all the countries in order to reduce poverty incidence.

Keywords: Development Strategy; Comparative Advantage; Poverty; Financial Development; Technological Choice Index (search for similar items in EconPapers)
JEL-codes: G29 O15 O2 O33 P59 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:41:y:2016:i:4:p:45-78

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