Structural transformation and economic development : can development traps be avoided?

Abstract

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Demand‐led industrialisation policy in a dual‐sector small open economy

“…The way to overcome these barriers will then depend on the institutional and structural conditions of the economy regarding the external sector and the role of government as a development agent in the process. Also, as observed in the structuralist theory, urbanisation in developing economies has resulted in the emergence of a large informal sector, mostly situated in the service sector (Lavopa, 2015). A high informality and the predominance of traditional activities in cities strengthen inequality, being the source of the widespread emergence of slums and other marginalised urban structures (Marx et al, 2013).…”

“…Also, as observed in the structuralist theory, urbanisation in developing economies has resulted in the emergence of a large informal sector, mostly situated in the service sector (Lavopa, 2015). A high informality and the predominance of traditional activities in cities strengthen inequality, being the source of the widespread emergence of slums and other marginalised urban structures (Marx et al., 2013).…”

“…Prebisch (1950) and ECLAC (1955), pioneers in the Latin American Structuralist (LAS) literature, position a similar kind of dynamic argument in the context of a global Center‐Periphery system where the diversified North (Centre) takes the lead in innovation (technical change) while the specialized South (periphery) lags behind (see Rodriguez, 2007). In the LAS framework, the productive structure of the Centre/North constantly diversifies (Lavopa, 2015), while the Southern economy benefits only in a partial way from the technological change done in the North (Botta, 2009). The adoption of cutting‐edge technologies in the South is fragmented, localized, and concentrated in export activities (Porcile, 2021), centred only on a few modern industries that absorb a small part of the workforce (Pinto, 1976; Prebisch, 1950; Sunkel, 1978).…”

“…We expand the SSM model by splitting the economy into a dual‐sector structure composed of a low‐productivity traditional sector and a modern, advanced sector. This part of our model is inspired by structuralist thinking, in particular by Porcile (2021) and Lavopa (2015). From an initial situation in which the economy consists largely of the traditional sector, we observe, under certain conditions (that we discuss in this paper), transition dynamics towards structural modernisation.…”

Firm Innovation and Productivity in Latin America and the Caribbean: The Engine of Economic Development (Summary)

“…Overall, the region is characterized by large disparities in productivity (Busso, Madrigal, and Pagés, 2013;Pagés, 2010), with many low-productivity firms coexisting with few firms with high productivity (Lavopa, 2015). Using the WBES data for LAC, it is found that the ratio between the labor productivity in the 90th and 10th percentiles in manufacturing is approximately 10:1.…”