Economic Development as Self-Discovery

Ricardo Hausmann and Dani Rodrik

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: In the presence of uncertainty about what a country can be good at producing, there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated. We develop a general-equilibrium framework for a small open economy to clarify the analytical and normative issues. We highlight two failures of the laissez-faire outcome: there is too little investment and entrepreneurship ex ante, and too much production diversification ex post. Optimal policy consists of counteracting these distortions: to encourage investments in the modern sector ex ante, but to rationalize production ex post. We provide some informal evidence on the building blocks of our model.

Date: 2002-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
https://research.hks.harvard.edu/publications/work ... x?PubId=936&type=WPN

Related works:
Journal Article: Economic development as self-discovery (2003)
Working Paper: Economic Development as Self Discovery (2002)
Working Paper: Economic Development as Self-Discovery (2002)
Working Paper: Economic Development as Self-Discovery (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp02-023

Access Statistics for this paper

More papers in Working Paper Series from Harvard University, John F. Kennedy School of Government Contact information at EDIRC.
Bibliographic data for series maintained by ().