The “Leading Sector” Model of Growth in Developing Countries

Abstract

Since the original Harrod‐Domar capital‐output models, and the highly influential work of Ragnar Nurkse, nearly all writers have found the effective constraints on growth to be on the side of supply. Thus stress has been placed on the “exchange gap” (shortage of imports) or the “savings gap” (shortage of capital formation) or on shortages in skills or natural resources. Others focus on constraints imposed by institutional or cultural factors, though often these are assumed to be fixed. An implicit assumption of all such models is that no problem will be posed by lack of effective demand, which may therefore be safely neglected. The apparent basis for this view is the presence of inflation, which suggests excessive demand. However, many writers do express great anxiety about the possibility of an inadequate demand for labour. They claim that excessive concern for the goal of maximum output gives rise to a shortage of capital and a “maluse” of capital in capital intensive processes, thus reducing the demand for labour and causing growing unemployment. The inconsistency of an insufficient demand for labour and an excessive demand for goods is not recognized nor is explained in terms of maldistribution of income or excessive use of capital intensive methods of production.

Sources of Growth in Colombia, 1963–80

“…The idea was to turn construction into a leading sector, by creating a non-subsidised indexed system of housing finance (the UPAC system) that would make saving more attractive and housing more affordable; once construction took off it would raise employment and pull the rest of the economy along with it; balance of payments pressures would be kept to a minimum by the low import intensity of construction and the rise in saving. (See Currie, 1971, 1974, and Hanson, 1976.) The UPAC system not only stimulated housing but forced further liberalisation of the financial sector (see Barro, 1975).…”

Inward Industrialisation as Development Strategy: A Critique

“…Inward industrialisation as an instrument to foster economic development owes much to the work of Currie (1971;1974;1981) on Colombia, and especially to his planning programme initiated there. The Colombian "Plan 1992 SAJE v60(3) p294 of the Four Strategies," officially ratified in 1971, rested on four basic planks including export promotion, enhanced productivity in the agricultural sector, income redistribution through progressive taxation, and urban development, particularly in low cost housing (Rogerson, 1989:157).…”

Currie's ‘leading sector’ strategy of growth: an appraisal

“…The objective of this paper is to make an assessment of the leading-sector model of growth as spelled out by Lauchlin Currie (1974). This model is based on the notion that the main constraint on growth lies not on the supply side, but on demand.…”

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This paper offers a new interpretation of Lauchlin Currie's (1974) leading-sector strategy. The idea of a leading sector normally conjures up notions of a favoured or privileged treatment.

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