DPR Debate: Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change

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Abstract

This DPR Debate is based on the contribution by Justin Lin, Chief Economist at the World Bank, and his colleague Célestin Monga, on ‘Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change’. The article under consideration is important and timely as it articulates a number of new policy implications from Justin Lin's earlier work on New Structural Economics, which was discussed in a previous DPR debate (Lin and Chang, 2009). This symposium contains the article and comments on it from five distinguished specialists, and closes with a rejoinder by Lin and Monga. This introduction discusses the article, the comments and the rejoinder.

The historical record indicates that, in all successful economies, the state has always played an important role in facilitating structural change and helping the private sector sustain it across time. This article puts forward a new approach to help policy-makers in developing countries identify those industries that may hold latent comparative advantage, and recommends ways of removing binding constraints to facilitate private firms' entry into those industries. Two types of government interventions are distinguished: first, policies that facilitate structural change by overcoming information, co-ordination and externality issues, which are intrinsic to industrial upgrading and diversification; and second, policies aimed at protecting certain selected firms and industries that defy the comparative advantage determined by the existing endowment structure.

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