Justin Lin

This paper proposes a demand-side theory on the appropriate financial structure for an economy. As argued in the new structural economics, the factor endowment structure in an economy determines its optimal industrial structure. Firms operating in different industries and applying different technologies have different characteristics in firm size a...

Since September 2008, the global economy has witnessed its most tumultuous times since theGreat Depression. The impressive coordinated policy response of the G-20 nations has helped theworld avoid the worst scenario. However, the global economy, especially the advanced countries,has not fully recovered.Structural reforms are required for advanced c...

China's government economic stimulus package in 2008-09 appears to have worked well. It seems to have been about the right size, included a number of appropriate components, and was well timed. Its subnational component was designed to maximize the impact of the stimulus package on the economy and minimize the potential procyclical elements that ar...

Africa’s economic performance has been widely viewed with pessimism. This paper uses firm-level data for 89 countries to examine formal firm performance. Without controls, manufacturing African firms do not perform much worse than firms in other regions. But they do have structural problems, exhibiting much lower export intensity and investment rat...

This paper provides a consistent explanation for the distinct economic performance among the Less Developed Countries (LDCs) from the perspective of government development strategy. We argue that government development strategy and resource misallocation are key determinants of economic development in LDCs, i.e. China. Descriptive statistics show t...

This chapter draws on lessons from history to argue that policy disappointments such as Ghana's mainly reflect failure not of politics but of economic thinking and policy making. There are now enough both failed and successful experiments in economic development for researchers and policy makers to draw on. It highlights the possibilities for poor...

Countries that ignite a process of rapid economic growth almost always do so while lacking what experts say are the essential preconditions for development, such as good infrastructure and institutions. This book uses this paradox to explain what is wrong with mainstream development thinking—and to offer a practical blueprint for moving poor countr...

This chapter analyzes the conditions needed to design and implement successful special economic zones and industrial parks. It discusses long-term trends and fundamental issues in global trade since trade is the main source of growth for low-income countries that have limited domestic demand. In recent years the story of global trade has often been...

This chapter analyzes the mechanics of failure and the secrets of economic success. Cesar Luis Menotti's strategy's main ingredients could serve as a metaphor for the basic argument in the chapter: any low-income country can achieve sustained and inclusive growth if it properly identifies its endowment structure and uses its most competitive factor...

This chapter examines some of the policy issues often presented as the causes of poor economic performance and underdevelopment. It identifies the most commonly posited causes such as insufficient physical capital, bad business environment and poor governance, weak human capital and absorptive capacity, low productivity, and bad cultural habits suc...

This chapter refutes the linear and almost teleological approach in vogue in development economics on political and financial institutions. It briefly discusses the theoretical issues at hand and suggests that policies take into account the requirements of both time and place, which emphasizes the importance of the development level. The chapter ac...

This chapter provides a methodological approach that draws lessons and insights from economic history and theory and uses empirics from economic analysis and policy practice. It starts with an observation of the increasingly globalized world economy in which technological development allows the use of factors of production in locations that maximiz...

This chapter evaluates lessons from development thinking and experience and identifies the main reasons why past intellectual and policy frameworks failed to yield the expected results. It offers a pragmatic blueprint for allowing low-income countries to ignite and sustain economic growth without preconditions. With the liberalization of trade in t...

This chapter talks about the elements for success that may sound abstract, but actually provide a framework for achieving sustained growth, employment creation, and poverty reduction in poor business environments. It explains how the elements are applied to real policy situations and offers a road map for implementing an economic development strate...

This chapter discusses the foundations of the most popular policy prescriptions that are offered to developing countries as blueprints for prosperity. It starts by sketching the historical intellectual background that determined economic policies in colonial times. It then reviews the various waves of development thinking that have dominated resear...

In this paper, we put forth an index of Inclusive Sustainable Transformation that captures the extent to which a country has developed a modern industry or services-based economy that at the same time protects the environment and is gender inclusive. This index distinguishes itself from other indicators that track the structural characteristics of...

The development literature lacks consensus about the link between aid effectiveness and governance improvement. A basic rational actor model is introduced to clarify how donors can influence recipient behaviors and more broadly how foreign aid can support or impede governance quality improvement. Adopting the underutilized perspective of donor beha...

China's economic development has been miraculous since the transition from a planned economy to a market economy in 1979. This article provides answers to five related questions: Why was it possible for China to achieve such extraordinary performance during its transition? Why was China unable to attain similar success before its transition started...

Although industrial policies in many countries have failed, a country’s economic development is bound to be unsuccessful without industrial policy. The responsibility of an economist is not to object to any kind of industrial policy for fear of failure, nor unconditionally support all kinds of industrial policies because industrial policy is a nece...

Much of the information relevant to policy formulation for industrial development is held by the private sector, not by public officials. There is, therefore, fairly broad agreement in the development literature that some form of structured engagement—often referred to as close or strategic coordination—between the public and private sectors is nee...

China’s economic development has been miraculous since its transition from a planned to a market economy in 1979. This article provides answers to six related questions: Why was it possible for China to achieve such extraordinary performance during its transition? Why was China unable to attain similar success before its transition started? Why did...

Economic development is a process of structural transformation with continuous technological innovation and industrial upgrading, which increases labor productivity, and accompanied improvements in infrastructure and institution, which reduces transaction costs. The middle-income trap is a result of a middle-income country’s failure to have a faste...

The world economy needs a growth-lifting strategy, and infrastructure financing seems to hold the key. Based on the New Structural Economics (Lin, 2010; 2012) we discuss the heterogeneity of capital focusing on the long-term versus short-term orientation (STO). Traditional neoliberalism assumes that capital is homogenous, complete capital account l...

This paper explores the ideas of development and the role of the state in economic development and institutional change from the New Structural Economics perspective. We argue that economic structures – including the structure of technology and industry, and hard and soft infrastructure – are endogenous to the endowment structure, which is given at...

Developing countries have for decades been trying to catch up with the industrialized high-income countries, but only a few have succeeded. Historically, structural transformation has been a powerful engine of growth and job creation. Traditional development aid is inadequate to address the bottlenecks for structural transformation, and is hence in...

China achieved average GDP growth of nearly 10 percent over the period 1978–2015. However, how long can such high levels of growth be sustained, especially when per capita GDP levels have reached middle-income status, and the normal tendency of economies is to slow down as they mature? This paper reviews the recent literature on the determinants an...

After more than three decades of unprecedented high growth at an average rate of nearly 10% per annum, China's economy has been slowing down since 2010, dropping to 6.9% in 2015, the lowest annual growth rate since 1990. As the world's largest economy in PPP terms and the second largest in terms of nominal exchange rates, such a slowdown has profou...

This paper aims to draw insights from New Structural Economics by applying its practical policy tool – the Growth Identification and Facilitation Framework (GIFF) – to least developed countries (LDCs) with a special focus on the case of Uganda. The GIFF offers practical development paths for enabling developing countries to follow comparative advan...

The world economy needs a growth-lifting strategy, and infrastructure financing appears to hold the key. Two new development banks have been established: the New Development Bank and the Asian Infrastructural Investment Bank (AIIB). However, what conceptual framework will they formulate? This paper addresses infrastructural financing issues from th...

This introductory chapter presents the objectives of this volume and discusses the challenges of producing relevant knowledge. It starts with an exploration of the reasons why Africa has remained neglected in economics, despite its important contributions to the discipline. It then highlights Africa’s enduring intellectual influence on some of the...

The New Structural Economics and (neo)Schumpeterian approaches aspire to be new paradigms in development policy, while Transition Economics has de facto been operating as such a paradigm in the context of Eastern Europe and FSU. They all represent powerful heuristics with farreaching implications on different policy areas. In policy terms, Eastern...

This issue of Journal of Economic Policy Reform is unique, in that, for the first time, it brings into direct communication the ideas of Transition Economics and New Structural Economics (NSE). Is NSE a real alternative for post-socialist countries? These and other issues are in the focus of this review contribution

This paper reviews economic growth theory in the framework of economic development and explores the possibility of sustained growth in the People's Republic of China (PRC) in the long run. We argue that the PRC has the potential to sustain relatively high growth rates. First, since the technological gap with major developed countries still exists,...

China is the largest and most rapidly growing emerging economy in the world. Its dynamic growth is accompanied by severe pollution problems and large emissions of carbon dioxide (CO2)—it now has the largest annual emissions in the world. China will also be one of the main victims of climate change, should no action be taken to shift the global econ...

The Washington Consensus reform resulted in economic collapse and stagnation in many transition economies and “lost decades” in other developing countries in 1980s and 1990s. The paper provides a new structural economics perspective of such failures. The Washington Consensus reform failed to recognize that many firms in a transition economy were no...

African countries are facing great opportunities but also formidable challenges in accelerating economic growth and sustaining a high level of economic performance. The experiences of East Asian countries may offer valuable insights for African leaders and governments in making concerted efforts to formulate and implement effective industrial polic...

Although whether governments should play a facilitating role in economic development has long been a topic for economic discourse and research, as an important instrument industrial policy is often and actively used by governments to promote economic development, both in history and at the moment. Despite much controversy surrounding whether and ho...

Analyzing the reasons for the lag in urbanization and the persistent widening of the urban- rural income gap in China from the viewpoint of government development strategy, we find that the government’s strategy of encouraging the development of capital-intensive sectors has resulted in a relative fall in labor demand in urban areas and thus delaye...

Industrial Policy Revisited : A New Structural Economics Perspective Although whether governments should play a facilitating role in economic development has long been a topic for economic discourse and research, as an important instrument industrial policy is often and actively used by governments to promote economic development, both in history a...

In this article the authors use quantile regressions to assess the relationship between economic and financial development at each percentile of the distribution of economic development. Thus, the quantile regressions provide information on how the associations between economic development and both bank and securities market development change as c...

Based on Malinowski's definition of culture as an integral whole of artifacts, organizations, and values, this paper analyzes the possibility of China's rapid economic development leading to a revival of Chinese culture with ren (benevolence) as its core value. Emerging economies such as India, Brazil, Russia, South Africa, and Indonesia have their...

Throughout human history, people have held their political leaders responsible for the general social and economic conditions of their nations. Fairly or unfairly, some leaders have been hailed as national heroes while others have been thrown out of power or even punished more harshly depending on the level of collective happiness or anger. But nev...

Knowledge validation has never been a painless process. It often takes a major, disastrous historical event for even the most self-evident ideas to gain wide recognition. It is therefore not surprising that the Great Recession of 2008–09 — whose global economic and social cost is still yet to be quantified -has led to a rethinking of many aspects o...

Before the 18th century, it took about 1,400 years for the western world to double its income level. In the 19th century, the same process took about 70 years, and in the 20th century only 35 years (Maddison, 1995). That dramatic acceleration in growth rates came about with the rapid technological innovation after the Industrial Revolution and the...

In his celebrated memoirs, Nelson Mandela recounts the story of having to battle his political adversaries and friends alike to convince them of the necessity of launching an armed movement in their fight against the unbearable brutalities of apartheid. Even his closest allies and supporters resented the idea of resorting to such a controversial st...

Only two years remain to deliver on the Millennium Development Goals (MDGs). Progress on the goals has been mixed at best and varies significantly across goals and countries (Chapter 2, this volume). Currently, several MDGs are unlikely to be attained either globally or by a majority of countries, with lagging progress most apparent in low-income c...

The dominant view of good governance as a pre-condition for economic success is theoretically compelling but empirically difficult to establish. Historical analyses tend to indicate a very strong correlation between institutional development and economic growth. Today’s high-income and good-governance countries generally had bad-governance environm...

As the world recovers only slowly from the 2008 financial crisis and Europe is facing a looming debt crisis, concerns have increased that the "new normal" -- a period of high unemployment, low returns on investment, high risks, and low growth -- may become protracted in advanced economies. If growth remains weak, unemployment rates and debt levels...

How can developing countries grow their economies? Most answers to this question center on what the rich world should or shouldn't do for the poor world. In The Quest for Prosperity, Justin Yifu Lin--the first non-Westerner to be chief economist of the World Bank--focuses on what developing nations can do to help themselves. Since the end of the Se...

This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Growth Identification and Facilitation Framework to help Latin America escape the middle-income trap. Countri...

This paper provides an historical overview of both the evolution of the economic performance of the developing world and the evolution of economic thought on development policy. The 20th century was broadly characterized by divergence between high-income countries and the developing world, with only a limited number (less than 10 percent of the eco...

The simmering sovereign debt crisis in the Euro Zone represents a looming threat to the recovery of the world economy and could lead to a renewed global financial crisis. The purpose of this paper is to analyze the root causes of the crisis in Europe and assess the extent to which it was driven by the global financial crisis and by factors internal...

This paper analyzes the historical evolution of the international monetary system in the context of the rising role of developing countries in the world economy and the emerging multi-polar growth setting. It evaluates the stability of the current"non-system"and how the global economic context is likely to affect that stability in the coming years...

While China has seen rapid economic growth over the last three decades, many studies document a negative correlation between traditional measurements of banking development and economic growth in China. Among many efforts to explain the low efficiency of Chinese banking sector, two arguments focus on the dominance of the four big state-owned banks...

Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy and occurs through a process of continuous industrial and technological upgrading. Since the 18th century, all countries that industrialized successfully inEurope, North America and East Asia followed their comparative advantage and...

Provides an overview of theoretical and empirical advances that support the notion that financial structure is important for economic development and endogenous to its industrial structure. The New Structural Economics argues that countries that pursue a comparative advantage-following development strategy perform better than other countries. The o...

Points out that as wages rise rapidly in dynamically growing emerging market economies, such as China, India, Brazil, Indonesia, and others, in the multipolar growth world of the 21st century, the labor-intensive industries in those emerging market economies will be losing comparative advantages and provide golden opportunities for other low-income...