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Advanced Search Abstract As strategies for achieving sustainable growth in developing countries are re-examined in light of the financial crisis, it is critical to take into account structural change and its corollary, industrial upgrading.
Economic literature has devoted a great deal of attention to the analysis of technological innovation, but not enough to these equally important issues.
The new structural economics outlined in this paper suggests a framework to complement previous approaches in the search for sustainable growth strategies. It takes the following into consideration.
First, an economy's structure of factor endowments evolves from one level of development to another. Therefore, the optimal industrial structure of a given economy will be different at different levels of development. Industrial upgrading and infrastructure improvement targets in developing countries should not necessarily draw from those that exist in high-income countries.
Third, at each given level of development, the market is the basic mechanism for effective resource allocation.
Such upgrading entails 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 industrial upgrading and infrastructure improvements.
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Mar 01, · Suzanne is founder of Catalyst At Large where she is a globally recognised adviser, speaker, and field builder in gender lens investing. She is the Co-Producer of the Global Gender Lens Investing Summit.