Economic development strategy, openness and rural poverty: A framework and China's experiences

Arbeitspapier

This paper argues that both openness and poverty in a country are endogenously determined by the country’s long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy’s existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms’ entry into an industry or choice of technology according to the economy’s existing comparative advantages. To carry out a CAD strategy, many governments of LDCs subsidize the firms in priority sectors by distorting capital prices, foreign exchange, and other inputs; and use administrative methods to allocate price-distorted inputs to the firms. The functions of market will be suppressed. Rent-seeking will be widespread. As a result, economic performance will be poor and the income distribution issue will worsen. Foreign trade will also be retarded. Only if governments of less-developed countries make following their economy’s comparative advantage the basic principle for promoting the economy’s industrial development, will the economy have an open and well functioning market, maintain a high rate of capital accumulation, upgrade its endowment structure quickly, and see a more equitable distribution of income and fewer poor.

Object Details

• ISBN: 9291908118
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Research Paper ; No. 2006/43

Classification and Topics

• Classification: Wirtschaft ; Industrialization; Manufacturing and Service Industries; Choice of Technology ; Development Planning and Policy: General ; Technological Change: Choices and Consequences; Diffusion Processes ; Economic History: Manufacturing and Construction: Asia including Middle East
• Subject: economic development strategy ; income distribution ; globalization ; poverty ; Entwicklungsstrategie ; Armut ; Globalisierung ; China

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lin, Justin Yifu ; Liu, Peilin
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/63241
• Last update: 10.03.2025, 11:43 AM CET