Public Policy And Industrial Transformation In The Process Of ...

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IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/6405.html My bibliography Save this paper Public policy and industrial transformation in the process of development
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Author

Listed:
  • Agenor, Pierre-Richard
  • Dinh, Hinh T.
Registered:
  • Pierre-Richard Agenor
  • Hinh T. Dinh

Abstract

This paper studies the role of public policy in promoting industrial transformation from an imitationbased, low-skill economy to an innovation-based, high-skill economy, where technological progress now occurs through the domestic invention of ideas. Industrial transformation is measured by changes in an index of industrial structure, defined as the ratio of the variety of imitation- to innovation-based intermediate goods. A key mechanism through which productivity increases initially in both the imitation and innovation sectors is through a knowledge externality associated with learning by doing in the imitation sector. The process of industrialization increases the demand for high-skill labor, inducing individuals to invest in education. The model also emphasizes the distinction between basic or core infrastructure, which promotes imitation, and advanced infrastructure, which promotes innovation. A calibrated version for a low-income country is used to perform several policy experiments, including an increase in investment in infrastructure, a reduction in the cost of training, and improved enforcement of property rights.

Suggested Citation

  • Agenor, Pierre-Richard & Dinh, Hinh T., 2013. "Public policy and industrial transformation in the process of development," Policy Research Working Paper Series 6405, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6405 as HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF JSON

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