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Local-foreign technology interface, resource-based development, and industrial policy: how Chile and Malaysia are escaping the middle-income trap

Lebdioui, Amir, Lee, Keun and Pietrobelli, Carlo (2020) Local-foreign technology interface, resource-based development, and industrial policy: how Chile and Malaysia are escaping the middle-income trap. Journal of Technology Transfer. ISSN 0892-9912

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Identification Number: 10.1007/s10961-020-09808-3

Abstract

This paper starts by showing that Chile and Malaysia are on the path of escaping the middle-income trap in terms of their income level relative to that of the USA. In contrast to the conventional view, we find that the leading export sectors are not manufacturing (such as electronics) in Malaysia or mining alone in Chile. Instead, the engines of growth have been (1) resource-based sectors (petroleum, rubber and palm oil) in Malaysia; and (2) non-mining resource-based sectors (salmon, fruits, wine and wood-based) in Chile. Furthermore, the sustained growth of these sectors is not the result of free-markets, as frequently argued, but also of specific industrial policy measures, that have enabled the accumulation of productive and innovation capabilities through R&D support, fiscal incentives, export assistance, and quality control. We also find that the emergence of locally-controlled firms has been an important aspect of this long-term success, although the sources of the initial learning included foreign actors and FDI. The cases of Chile and Malaysia consequently show the possibility of escaping the middle-income trap not through manufacturing but instead through resource-based development. Such strategy differs from the so-called short cycle technology-based catch-up by the East Asian tigers and from the unsustainable commodity rent-extraction in resource-rich countries, but is consistent with the view that emphasizes the need to specialize in sectors with low entry barriers, and to promote investments in innovation and technological capabilities.

Item Type: Article
Official URL: https://www.springer.com/journal/10961
Additional Information: © 2020 The Authors
Divisions: International Development
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O54 - Latin America; Caribbean
Date Deposited: 11 Jun 2020 11:30
Last Modified: 29 Jul 2020 11:15
URI: http://eprints.lse.ac.uk/id/eprint/105056

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