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Fast and furious. A Kaldorian analysis of dynamic industries

Nicola Cantore, Caroline Lennon and Michele Clara

DEPARTMENT OF POLICY, RESEARCH AND STATISTICS WORKING PAPER 5/2016
Kaldor’s first growth law claims that the growth rate of GDP is strongly fuelled by the growth rate of manufacturing. Despite the fact that the literature has demonstrated the empirical validity of this law for decades, only now a strand of research is emerging, which focuses on whether specialization in certain manufacturing sub-industries is relevant for growth. This paper examines whether specialization in high-tech manufacturing entails a growth premium in addition to the growth impulse generated by industrialization. Based on a dataset of 146 countries over the period 1971–2011, we find that high-tech manufacturing industries foster economic growth more so than low-and medium-tech industries. Economies of scale and technological spillovers are among the drivers identified in the literature to explain the growth enhancing effects of technology-intensive industries.
Courtesy: UNIDO
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