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TRANSCRIPT
A comment on:
The New Structural EconomicsA Rethinking of Development Economics and PolicyA Rethinking of Development Economics and Policy
Justin Yifu LinJustin Yifu LinSenior Vice President and Chief Economist
The World Banke o d a
by Ricardo Hausmann
Overview
• Many things I like about the approach
• Many things I like about the implementation of the approachpp
• I have a few quibbles
• and I propose differently (better?) tools of• …and I propose differently (better?) tools of analysis and of implementation
What I like
• Development is not about more of the same• …it is about structural transformation• In my language: it is about accumulating more
d ti k l dproductive knowledge• …expressing it in more goods
d i l d• … and in more complex goods• This process is rife with market failures• Something makes some products more accessible than othersG t h l k t• Governments can help markets
Thailand vs GhanaThailand vs Ghana0
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a (c
onst
ant 2
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00D
P p
er c
apita
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1960 1970 1980 1990 2000 2010YearYear
Thailand Ghana
The importance of imitation
• What has propelled human culture over the past 50 000 years is our unique ability to imitate50,000 years is our unique ability to imitate
• Not by Genes alone, Boyd & Richerson• Origins of Cumulative Culture, Robert Kurzban, et al.Origins of Cumulative Culture, Robert Kurzban, et al. Science 335, 1056 (2012);
• Looking at what others do and copying them is a f d l f dfundamental way forward
• It is a fantastic algorithm for social progressMuch more efficient than RCTs– Much more efficient than RCTs
• That is why George Clooney sells perfume• That is what Justin Lin suggests we doThat is what Justin Lin suggests we do
CAD vs CAF: Justin Lin’s viewCAD vs CAF: Justin Lin s view
• Countries should “choose” industries that areCountries should choose industries that are closer more high scale but relatively “close” to their comparative advantage
• Their comparative advantage is captured by their relative abundance of capital and labor– A la Heckscher‐Ohlin
• If you defy comparative advantage you will y y p g ywaste resources– China and Latin America in the 1960s
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CAD vs CAF: my viewCAD vs CAF: my view
• Comparative advantage is not determined byComparative advantage is not determined by your broad endowment of factors but by what you know how to do– i.e. the productive knowledge you have
• Making new things involves a chicken and egg g g ggproblem– Watches and matchmakers
• Solved by moving preferentially towards nearby goods
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Growth Identification and FacilitationGrowth Identification and Facilitation
• Step 1: Find fast growing countries with a similar endowment structure and with about 100% higher per capita income. Identify dynamically growing tradable industries that have grown well in those countries for gthe last 20 years.
• We can do better• Look for products that are more sophisticated• Look for products that are more sophisticated
– PRODY or PCI• Look how far they are in the product space• Look at how strategic they are• No need to assume that technology has remained constant for 20 yearsconstant for 20 years
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Two additional pointsTwo additional points
• The problem is not so much how to identifyThe problem is not so much how to identify sectors– Not obvious that this should be centralized– Not obvious that this should be centralized
– Maps can empower everybody to try their luck
it i h t h l th• …it is how to help them– Open architecture to pioneers and their initiatives
• Justin Lin has great ideas regarding the role of industrial zones, FDI, pioneer encouragement
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