Chang Adn Lin Debate

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Ha-Joon Chang * Reader in the Political Economy of Development, Faculty of Economics at University of Cambridge.
Justin Lin * Chief Economist and Senior Vice-President of the World Bank (June 2008- 2012). * In 2007 gave the Marshall lectures at Cambridge University on themes related to this debate.

Main argument by Lin * Industrialisation/upgrading should conform符合 to current comparative advantage * State taking a lead role in development * Developing countries are ridden with market failures * Arthur Lewis (1955) – ‘No country has made economic progress without positive stimulus from intelligent governments’ * “Facilitating state” - state that facilitates the private sector’s ability to exploit the country’s areas of comparative advantage * Optimal industrial structure is endogenous to the country’s own endowment structure * Effective facilitating state creates larger surplus/profits * Faster growth from ‘off the shelf’ technology

* encourages firms to adopt technologies which are consistent with the country’s comparative advantage * government adopts a set of required policies/institutions to encourage firms to adopt technology which is consistent with the country’s comparative advantage and makes them profitable in an open, free and competitive market.

* Lower learning costs (when industrial policy conform to comparative advantage) * Slow capital accumulation & industrial upgrading process (when industrial policy defy comparative advantage)

Main Arguments – Chang, H * Welcomes the importance of industrial upgrading with comparative advantage as a baseline * Assumptions of Heckscher-Ohlin-Samuelson theory (HOS) are unrealistic * E.g. factor immobility, same technology available * Factor accumulation over time can be restricted to certain industries * Technological…...

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