Understanding Technology Development

There are wide variations between the developing countries in the capabilities of their enterprises to import, utilize and improve upon industrial technologies. It is important for the purposes of industrial policy to understand why these differences exist and how industrial capabilities may be improved. This article presents the findings of recent research into the nature of capability development and the role of government policies in promoting such development. The process of becoming efficient in industry is very different from the usual textbook portrayal, in which firms costlessly access and absorb new technologies. In reality, there is a long and uncertain learning process involved, differing with the nature of the technology, the efficiency of factor and product markets, and the provision of various technological information and services from the infrastructure institutions. There is a widespread risk in developing countries that all these markets suffer from failures: the scope for technology development policies rests on the need to remedy these failures. The experience of the most successful newly industrializing economies (NIEs) suggests that well-designed interventions, both selective and functional, are needed to promote technology development. Experience clearly shows the dangers of government failure, but it is necessary to retain a large role for the government if industry is to succeed. The pattern and implementation of interventions have to be very different. This article points out the outlines of economically desirable interventions.     

Location and Growth in the Brazilian Northeast

Abstract Clustering of economic performance across jurisdictions has generated considerable research on the spillovers and linkages among geographical neighbors. Much of this work, however, has been aspatial, implying that the influence of location attributes on growth has been largely ignored. In this paper, we examine the contribution of location to regional economic growth using municipio‐level data for the Brazilian Northeast—a historically lagging region of the country. We test if productivity among northeastern municipios is converging to a steady state and whether spatial externalities are linked to productivity growth in individual municipios. We find that, conditional on structural characteristics, productivity among municipios is converging at about 3 percent per year. Further, productivity in individual municipios is positively associated with own‐structural characteristics but negatively associated with productivity growth in neighboring municipios. This means that there are negative spatial externalities coming from productivity improvements in neighboring regions.     

Import Liberalization and Industrial Performance: The Conceptual Underpinnings

Import liberalization is a centrepiece of conventional approaches to policy reform and structural adjustment. Despite substantial criticism of the effects of liberalization, the underlying economic reasoning is widely accepted. This article examines the ways in which different schools of thought analyse the effect of ‘opening up’ the economy on industrial development, and contrasts neoclassical and evolutionary approaches. Different conceptualizations of ‘market failure’ emerge as the focal point for differences in discussing the role and scope of government intervention, with a convergence between the information-economics and firm-level evolutionary approaches (particularly the ‘technological capabilities’ approach). The empirical literature and its interpretation by different schools are reviewed, demonstrating how policy recommendations are strongly affected by the particular theory that informs the analysis of market failure and efficiency. It is concluded that empirically oriented micro-level approaches are the most promising in guiding policy decisions.