Development economics is a new sub-discipline in modern economics. The first generation of development economics is structuralism. The second generation of development economics is neoliberalism. Most developing countries followed the above two generations of development economics and failed to achieve industrialization and modernization. The purpose of this paper is to introduce the third generation of development economics, called new structural economics, which advises governments in developing countries to play a facilitating role in the development of industries in a market economy according to the country’s comparative advantages. The paper also discusses how the government may use industrial policies to play this facilitating role and some new theoretical insights from new structural economics.Design/methodology/approachThe paper draws on the experiences of success and failure in developing countries to generate new understanding about the nature and causes of economic development in developing countries.FindingsThe structuralism failed because it ignored the endogeneity of economic structure in a country. The neoliberalism failed because it neglected the endogeneity of distortions in the transition economies.Originality/valueThe paper proposes new policy and theoretical framework for developing countries.
Asian Education and Development Studies – Emerald Publishing
Published: Jul 9, 2020
Keywords: Industrial policy; Economic transition; Development economics; Role of state