The determinants of industrialisation in developing countries, 1960-2005

Francesca Guadagno


Industrialisation is generally considered a synonym of economic development. This paper contributes to the literature on the engine of growth hypothesis with an empirical analysis of the determinants of industrialisation. The paper goes back to the Cornwall (1977) model of manufacturing as an engine of growth and estimates the first equation of the model, i.e. the equation of manufacturing output growth. Hausman and Taylor models are estimated for a sample of 74 countries for the period 1960-2005. The results indicate that industrialisation is faster for larger countries with an undeveloped industrial base, strong export performance, and undervalued exchange rates. Skills and knowledge accumulation played an increasingly important role since the mid-1990s. Robustness checks corroborate the validity of these findings.

Keywords: industrialisation, manufacturing sector, technological change, industrial policy

JEL Classification: O10, O14, O25

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