Justin Yifu Lin - The Third Wave of Development Economics
New Structural Economics is considered the third wave of development economics
| Wave | Period | Core Idea | Representative |
|---|---|---|---|
| First Wave | 1950s-1970s | Structuralism, Import Substitution, State-led | Prebisch, Hirschman |
| Second Wave | 1980s-1990s | Neoliberalism, Washington Consensus | World Bank, IMF |
| Third Wave | 2000s- | Comparative Advantage + Facilitative State | Justin Yifu Lin |
Where S = Structure variable
S* = Optimal structure
Factor endowment structure determines optimal industrial structure
Industrial development should follow current comparative advantage
Government plays active role in infrastructure and institutions
Factor endowment changes drive industrial upgrading and growth
Adjust capital-labor ratio to observe optimal industry type changes
| K/L Range | Industry Type | Example Industries |
|---|---|---|
Complete causal chain from factor endowments to economic growth
Understanding the contribution of structural upgrading to TFP growth
Where gTFP ≈ θ · Ṡ (structural upgrading speed)
Key areas where government plays active role in NSE
Power, ports, transport, communication networks
Financial institutions, standards, IP, vocational education
Identify and screen potential advantage industries
Build industrial parks and clusters
Provide venture capital, policy finance support
Address positive and negative externalities of industrial development
Growth Identification and Facilitation Framework
Identify countries with 2x GDP per capita and rapid growth
Analyze dynamic advantage industries in benchmark countries
Assess feasibility of developing these industries domestically
Identify and resolve infrastructure and institutional bottlenecks
Test in industrial parks or special economic zones
Attract FDI and private capital
How different countries apply NSE principles for industrial upgrading
Textiles, garments, light manufacturing exports
Consumer electronics, home appliances
Automobiles, shipbuilding, machinery
New energy, digital economy, aerospace
Textiles, footwear, agro-processing
Samsung and other foreign electronics manufacturing bases
Machinery, auto parts, high-tech industries
GIFF framework applied, light industry identified
Hawassa Industrial Park and other infrastructure
PVH, Jiangsu Guotai and other companies entered
Comparing NSE with neoliberalism and structuralism
| Dimension | New Structural Economics | Neoliberalism | Structuralism |
|---|---|---|---|
| Market Role | Leading | Absolute | Secondary |
| Government Role | Facilitative | Minimal | Omnipotent |
| Industrial Policy | Targeted | None | Broad |
| Technology Path | Follow comparative advantage | Spontaneous evolution | Catching up |
| Comparative Advantage View | Dynamic endogenous | Static exogenous | Can be surpassed |
| Policy Prescription | Remove constraints + Industrial policy | Liberalization + Privatization | Import substitution + Protection |