Activation of a Modern Industry

January 1, 2002

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper constructs an integrated framework to disentangle the underlying economic mechanism of industrial transformation. We consider three essential elements for the analysis: skill requirements, industry-wide spillovers, and degrees of consumption subsistence. We find that human and nonhuman resources, production factor matching, and industrial coordination are all important for activating a modern industry. In the process of industrial transformation, job destruction may exceed job creation, and income distribution may get worse immediately following the activation of a modern industry. An array of policy prescriptions for advancing a poor country is provided.

Subject: Employment, Labor, Skilled labor, Unemployment, Wages

Keywords: capital allocation constraint, capital funding, capital input, capital-labor complementarity, cost differential, developing country, East Asia, economic development, Employment, full employment, industrial transformation, labor input, labor reallocation, luxury good, reallocation constraint, Skilled labor, spillovers, subsistence, Unemployment, utility function, Wages, WP

Pages:
17
Volume:
2002
DOI:
https://doi.org/10.5089/9781451843279.001
Issue:
015
Series:
Working Paper No. 2002/015
Stock No:
WPIEA0152002
ISBN:
9781451843279
ISSN:
1018-5941

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