Structural Change and Development Policy PDF
Preview Structural Change and Development Policy
dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP Structural Change and Development Policy A World Bank Research Publication if with the assistance Hazel Elkington 0/ including contributions Montek S. Ahluwalia Michael Bruno N icho las G. Carter Arthur MacEwan Alan M. Strout J. William Raduchel Larry E. Westphal Published for the World Bank Oxford University Press Oxford University Press NEW YORK OXFORD LONDON GLASGOW TORONTO MELBOURNE WELLINGTON HONG KONG TOKYO KUALA LUMPUR SINGAPORE JAKARTA DELHI BOMBAY CALCUTTA MADRAS KARACHI NAIROBI DAR ES SALAAM CAPE TOWN © 1979 by the International Bank for Reconstruction and Development I The World Bank 1818 H Street, N.W., Washington, D.C. 20433 U.S.A. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Manufactured in the United States of America. The views and interpretations in this book are the author's and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Library of Congress Cataloging in Publication Data Chenery, Hollis Burnley. Structural change and development policy. Bibliography: p. 497 Includes index. 1. Economic development. 2. Underdeveloped areas. 3. Comparative economics. I. Elkington, Hazel, joint author. II. International Bank for Reconstruction and Development. III. Title. HD82.C474 1979 338.9 79-18026 ISBN 0-19-520094-2 ISBN 0-19-520095-0 pbk. Acknowledgments The publisher, the author, and the \Vorld Bank acknowledge with thanks permission to reprint or adapt the fonowing copyrighted material: J. "Substitution in Planning Models" by Hollis B. Chenery and William Raduchel. Reprinted by permission of the publishers from Studies in Development Planning, edited by Hollis B. Chenery. Cambridge, Mass.: Harvard University Press. Copyright © 1971 by the President and Fel lows of Harvard College. "The Interdependence of Investment Decisions" by Hollis B. Chenery. Reprinted from The Allocation of Economic Resources, by Moses Abramovitz and others, with the permission of the publishers, Stanford University Press. © 1959 by the Board of Trustees of the Leland Stan ford Junior University. "Economies of Scale and Investment over Time" by Honis B. Chenery and Larry E. "Westphal. Reprinted by permission from Public Econom ics, edited by J. Margolis. © 1969 by the International Economic Asso ciation, st. Martin's Press, Inc., and Macmillan & Co., London and Basingstoke. "Comparative Advantage and Development Policy" by Hollis B. Chenery. Reprinted by permission from American Economic Review, vol. 51, no. I (March 1961), © 1961 by the American Economic Association. "Development Alternatives in an Open Economy: The Case of Israel" by Hollis B. Chenery and Michael Bruno. Reprinted by permission from The Economic Journal, vol. 72, no. 285 (March 1962), © 1962 by Cambridge University Press. "Optimal Patterns of Growth and Aid: The Case of Pakistan" by Hollis B. Chenery and Arthur MacEwan. Reprinted by permission from The Theory and Design of Economic Development, edited by Irma Adelman and Erik Thorbecke. © 1966 by The Johns Hopkins University Press. "Foreign Assistance and Economic Development" by Hollis B. Chenery and Alan M. Strout. Reprinted by permission from American Economic Review, vol. 56, no. 4 (September 1966), © 1966 by the American Economic Association. "Growth and Poverty in Developing Countries" by Montek S. Ahluwalia, Nicholas G. Carter, and Hollis B. Chenery. Reprinted from The Jour nal of Development Economics, vol. 6, no. 3 (September 1979) by arrangement with the publisher, North-Holland Publishing Company. © 1979 by the International Bank for Reconstruction and Development. v Contents List of Figures x List of Tables xiii Preface xvi Part One. A Framework for Policy Introduction 1 1. Economic Growth and Structural Change 5 Dimensions of the Transition 6 Alternative Patterns of Specialization 21 Transitional Countries 29 Implications 44 2. Models of the Transition 46 Alternative Modes of Analysis 47 Development Phenomena 55 An Approach to Policy 60 Part Two. Internal Structure Introduction 67 3. The Process of Industrialization 70 A Model of Industrialization 71 Patterns of Specialization 90 Sources of Industrialization 108 Overview 140 vii viii CONTENTS 4. Substitution and Structural Change 143 WITH WILLIAM J. RADUCHEL Substitution among Commodities and Factors 144 A Planning Model with Substitution 146 Surplus Labor and External Capital 165 Implications 172 5. The Interdependence of Investment Decisions 173 The Problem 174 The Model 177 Measurement of the Effects of Interdependence 188 Evaluation 204 Appendix. The Calculation of Prices and Total Costs 213 6. Economies of Scale and Investment over Time 217 WITH LARRY E. WESTPHAL Statement of the Problem 218 Formulating the Model 221 Investment Patterns 235 Conclusions 266 Part Three. External Structure Introduction 269 7. Comparative Advantage and Development Policy 272 Conflicts between Trade Theory and Growth Theory 273 The Measurement of Optimum Resource Al1ocation 281 Comparative Advantage and Balance in Development Programs 299 Conclusions 306 8. Development Alternatives in an Open Economy: The Case of Israel 309 WITH MICHAEL BRUNO Limits to Growth in Israel 310 A Model of Development Alternatives 314 Bottlenecks and Sector Limitations 334 The Choice of Policy 337 The Productivity of Foreign Assistance 339 9. Optimal Patterns of Growth and Aid: The Case of Pakistan 342 WITH ARTHUR MACEWAN The Analytical Framework 343 The Model 347 Growth Alternatives for Pakistan 355 Development and Assistance Strategy 376
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