A Neoclassical Approach to Structure and Change
The starting point for the analysis of economic development is an economy’s
endowments. Endowments are a given in an economy at any specifi
c time and are changeable over time. Following the tradition of classical
economics, economists tend to think of a given country’s endowments as
consisting only of its land (or natural resources), labor, and capital (both
physical and human).2 These are in fact factor endowments, which fi rms
in an economy can use in production. It should be noted that the analysis
of new structural economics focuses on the dynamics of the capital/labor
ratio. This is because land is exogenously given in any realistic discussion of
a country’s development and natural resources, such as mining resources,
exist underground in fi xed quantity and their discovery is often random.
Conceptually, it is useful to add infrastructure as one more component
in an economy’s endowments. Infrastructure includes hard (or tangible)
infrastructure and soft (or intangible) infrastructure. Examples of hard
infrastructure are highways, port facilities, airports, telecommunication
systems, electricity grids, and other public utilities. Soft infrastructure consists
of institutions, regulations, social capital, value systems, and other
social, economic arrangements. Infrastructure affects the individual fi rm’s
transaction costs and the marginal rate of return on investment.
Countries at different levels of development tend to have different
economic structures due to differences in their endowments. Factor
endowments for countries at the early levels of development are typically
characterized by a relative scarcity of capital and relative abundance of
labor or resources. Their production activities tend to be labor intensive
or resource intensive (mostly in subsistence agriculture, animal husbandry,
fi shery, and the mining sector) and usually rely on conventional, mature
technologies and produce “mature,” well-established products. Except for
mining and plantations, their production has limited economies of scale.
Their fi rm sizes are usually relatively small, with market transactions often
informal, limited to local markets with familiar people. The hard and soft
infrastructure required for facilitating that type of production and market
transactions is limited and relatively simple and rudimentary.
At the other extreme of the development spectrum, high-income countries
display a completely different endowment structure. The relatively
abundant factor in their endowments is typically capital, not natural
resources or labor. They tend to have comparative advantage in capital
intensive industries with economies of scale in production. The various
types of hard infrastructure (power, telecommunication, roads, port facilities,
etc.) and soft infrastructure (regulatory and legal frameworks, cultural
value systems, etc.) that are needed must comply with the necessities of
national and global markets where business transactions are long distance
and large in quantity and value.
Economic development requires continuous introduction of new and
better technology to an existing industry. Most people in low-income
countries depend on agriculture for their livelihood. Improvements
in agricultural technology are key to increasing farmers’ income and
reducing poverty. However, economic development also requires continuous
diversifying and upgrading from existing industries to new, more
capital-intensive ones. Without such a structural change, the scope for
sustained increase in per capita income will be limited. Therefore, the
discussion in this paper will focus mostly on issues related to industrial
upgrading and diversifi cation.
Developing countries have the advantage of backwardness in the
upgrading process and a whole spectrum of industries with different levels
of capital intensity available for them to choose. However, they must fi rst
upgrade their factor endowment structure, which requires their stock of
capital to grow more rapidly than the labor force (see Ju, Lin, and Wang
2009). When they move up the industrial ladder in the process of economic
development, they also increase their scale of production—because of the
indivisibility of capital equipment. Their fi rms become larger and need a
bigger market, which in turn necessitates correspondent changes in power,
transportation, fi nancial arrangements, and other soft infrastructure.
Economic development is a process of continuous technological innovation and structural transformation. Development thinking is inherently tied to the quest for sustainable growth strategies. This book provides a neoclassical approach for studying the determinants of economic structure and its transformation and draws new insights for development policy. The market is the basic mechanism for effective resource allocation at each level of development. However, economic development as a dynamic process entails structural changes, including industrial upgrading and diversification and corresponding improvements in hard and soft infrastructure. Such upgrading and improvements require coordination and go hand in hand with large externalities to firms transaction costs and returns to capital investment. Thus, in addition to an effective market mechanism, the government should play an active role in facilitating structural changes. The book provides empirical evidence in support of this framework as well as concrete advice to development practitioners.
endowments. Endowments are a given in an economy at any specifi
c time and are changeable over time. Following the tradition of classical
economics, economists tend to think of a given country’s endowments as
consisting only of its land (or natural resources), labor, and capital (both
physical and human).2 These are in fact factor endowments, which fi rms
in an economy can use in production. It should be noted that the analysis
of new structural economics focuses on the dynamics of the capital/labor
ratio. This is because land is exogenously given in any realistic discussion of
a country’s development and natural resources, such as mining resources,
exist underground in fi xed quantity and their discovery is often random.
Conceptually, it is useful to add infrastructure as one more component
in an economy’s endowments. Infrastructure includes hard (or tangible)
infrastructure and soft (or intangible) infrastructure. Examples of hard
infrastructure are highways, port facilities, airports, telecommunication
systems, electricity grids, and other public utilities. Soft infrastructure consists
of institutions, regulations, social capital, value systems, and other
social, economic arrangements. Infrastructure affects the individual fi rm’s
transaction costs and the marginal rate of return on investment.
Countries at different levels of development tend to have different
economic structures due to differences in their endowments. Factor
endowments for countries at the early levels of development are typically
characterized by a relative scarcity of capital and relative abundance of
labor or resources. Their production activities tend to be labor intensive
or resource intensive (mostly in subsistence agriculture, animal husbandry,
fi shery, and the mining sector) and usually rely on conventional, mature
technologies and produce “mature,” well-established products. Except for
mining and plantations, their production has limited economies of scale.
Their fi rm sizes are usually relatively small, with market transactions often
informal, limited to local markets with familiar people. The hard and soft
infrastructure required for facilitating that type of production and market
transactions is limited and relatively simple and rudimentary.
At the other extreme of the development spectrum, high-income countries
display a completely different endowment structure. The relatively
abundant factor in their endowments is typically capital, not natural
resources or labor. They tend to have comparative advantage in capital
intensive industries with economies of scale in production. The various
types of hard infrastructure (power, telecommunication, roads, port facilities,
etc.) and soft infrastructure (regulatory and legal fr
value systems, etc.) that are needed must comply with the necessities of
national and global markets where business transactions are long distance
and large in quantity and value.
Economic development requires continuous introduction of new and
better technology to an existing industry. Most people in low-income
countries depend on agriculture for their livelihood. Improvements
in agricultural technology are key to increasing farmers’ income and
reducing poverty. However, economic development also requires continuous
diversifying and upgrading from existing industries to new, more
capital-intensive ones. Without such a structural change, the scope for
sustained increase in per capita income will be limited. Therefore, the
discussion in this paper will focus mostly on issues related to industrial
upgrading and diversifi cation.
Developing countries have the advantage of backwardness in the
upgrading process and a whole spectrum of industries with different levels
of capital intensity available for them to choose. However, they must fi rst
upgrade their factor endowment structure, which requires their stock of
capital to grow more rapidly than the labor force (see Ju, Lin, and Wang
2009). When they move up the industrial ladder in the process of economic
development, they also increase their scale of production—because of the
indivisibility of capital equipment. Their fi rms become larger and need a
bigger market, which in turn necessitates correspondent changes in power,
transportation, fi nancial arrangements, and other soft infrastructure.
本文摘自《新结构经济学》
Economic development is a process of continuous technological innovation and structural transformation. Development thinking is inherently tied to the quest for sustainable growth strategies. This book provides a neoclassical approach for studying the determinants of economic structure and its transformation and draws new insights for development policy. The market is the basic mechanism for effective resource allocation at each level of development. However, economic development as a dynamic process entails structural changes, including industrial upgrading and diversification and corresponding improvements in hard and soft infrastructure. Such upgrading and improvements require coordination and go hand in hand with large externalities to firms transaction costs and returns to capital investment. Thus, in addition to an effective market mechanism, the government should play an active role in facilitating structural changes. The book provides empirical evidence in support of this fr