Publication: A Cluster-Based Industrial Development Policy for Low-Income Countries
Loading...
Published
2011-06-01
ISSN
Date
2012-03-19
Author(s)
Editor(s)
Abstract
The need to construct an effective strategy for industrial development in low-income countries has been largely ignored by development economists because industrial policies have failed in many developing countries. This does not imply, however, that industrial development cannot be promoted. This paper attempts to synthesize the conventional wisdom in development economics with recent advancements in various fields of economics (such as theories of endogenous growth and agglomeration economies) to provide a useful framework to design a strategy for industrial development, which consists of investments in managerial human capital followed by the provision of credit and the construction of industrial zones.
Link to Data Set
Citation
“Otsuka, Keijiro; Sonobe, Tetsushi. 2011. A Cluster-Based Industrial Development Policy for Low-Income Countries. Policy Research working paper ; no. WPS 5703. © World Bank. http://hdl.handle.net/10986/3467 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication The Evolution of Local Participatory Democracy in Nepal(Washington, DC: World Bank, 2025-11-05)Nepal is, according to its constitution, among the world’s most decentralized countries, with a long and complex tradition of local-level public participation. This paper traces the evolution of Nepal’s modern participatory institutions, examining the extent to which they are “induced” by external interventions versus being “organically” rooted in indigenous practices. The paper identifies three broad phases: an initial focus on participation in project implementation; a subsequent phase that expanded citizen engagement; and a third phase of citizen empowerment, culminating in the 2015 federal constitution, which granted unprecedented local autonomy. The analysis yields five key findings. First, over the past 50 years, successive reforms have progressively expanded opportunities for citizens to influence local decision-making. Second, these reforms have integrated traditional participatory mechanisms into formal institutions of local government. Third, although central-level initiatives exist, most participatory platforms continue to operate at the local level. Fourth, the federal constitution has created a new landscape of local democracy, embedding autonomy and accountability. Fifth, although they are still valued in many ethnic and territorial communities, traditional participatory practices are gradually disappearing. The paper concludes by offering policy recommendations to help donor agencies and governments strengthen Nepal’s democratic trajectory. It argues that effective interventions should build on Nepal’s deep participatory traditions while recognizing the constitutional reality of far-reaching local autonomy.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication Closing the Gender Gap in Entrepreneurship: Overcoming Challenges in Law and Practice for Female Entrepreneurs(Washington, DC: World Bank, 2026-01-07)Despite significant strides toward gender equality, women around the world continue to encounter systemic obstacles that hinder their entrepreneurial success. This paper systematically reviews the literature on the barriers female entrepreneurs face and the solutions proposed to overcome these challenges. It discusses institutional factors, financial factors, human capital factors, and social and cultural factors. The literature overview is complemented by a series of stylized facts that illustrate how overcoming some of these existing barriers is correlated with improved women’s entrepreneurship and female labor force participation, drawing on the World Bank’s Women, Business and the Law database as well as the World Bank’s Enterprise Surveys. The findings underscore the need for creating an enabling environment where women can thrive as entrepreneurs.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Building Engines for Growth and Competitiveness in China : Experience with Special Economic Zones and Industrial Clusters(World Bank, 2010)China's meteoric economic rise over the past three decades is an unprecedented "growth miracle" in human history. Since the Open Door policy and reforms that began in 1978, China's gross domestic product (GDP) has been growing at an average annual rate of more than 9 percent, with its global share increasing from 1 percent in 1980 to almost 6.5 percent in 2008 and its per capita GDP increasing from US$193 to US$3,263. Total exports have been growing at an average annual rate of 13 percent (21.5 percent from 1998 to 2007), with China's share of total exports increasing from 1.7 percent in 1980 to 9.5 percent in 2008. In 2007, China's incremental growth in real GDP actually exceeded its entire real GDP in 1979. In 2010, China is set to outpace Japan and become the world's second-largest economy. China has indisputably become an important growth engine of the global economy and a leader in international trade and investment. Rapid growth in the past decades has helped lift more than 400 million people out of poverty. These results are truly impressive. While China's rapid rise has become a hot topic for development debate among policy makers, business people, and scholars all over the world, the numerous special economic zones (SEZs) and industrial clusters that have sprung up since the reforms are undoubtedly two important engines for driving the country's growth.Publication Korea as a Knowledge Economy : Evolutionary Process and Lessons Learned(Washington, DC: World Bank, 2007)This report on Korea is geared towards policy makers from developing countries that are in the midst of, or are intending to, embark on the transition towards the knowledge economy. It provides pragmatic policy lessons drawn from Korea's forty-five years of knowledge-based growth. This report not only looks at the current policies and challenges of today's high income Korea, but also reviews its historical economic development since the 1960s when Korea was still a low income country. It follows Korea through the decades as it undertook an array of knowledge strategies that propelled it through the various income levels. This report therefore provides compelling policy lessons that are relevant for developing countries at different stages of economic development.Publication Knowledge and Innovation for Competitiveness in Brazil(Washington, DC : World Bank, 2008)Brazil has made considerable progress toward macroeconomic stability since reform measures began to take hold in the early 1990s, and its economy has produced stronger growth as a result an average of 2.5 percent annually over the past decade. This study provides a broad, cross-sectoral analysis of Brazil's capacity for producing knowledge and innovation. As such, it moves beyond the traditional recommendation that is, builds a stable macroeconomic environment and business-friendly physical and policy infrastructure and instead seeks a more comprehensive approach. The fact is that Brazil has delivered some important successes with efforts to develop innovation in agriculture, aerospace and energy. But like other middle-income nations, it is discovering that it must re-evaluate its education system, its information technology infrastructure, and its policy framework for encouraging innovation to ensure that its economy as a whole is growing fast enough to keep up with the global competition while also guaranteeing progress in its fight against poverty. This study was developed in close consultation with Brazilian government and civil society leaders, who are deeply engaged with the question of how to foster innovation and greater economic competitiveness. Indeed, the breadth of the support for this study is a testament to Brazil's pragmatism and perseverance in pursuing more robust growth. It is also a welcome reflection of its continually evolving relationship with the World Bank. Today, Brazil has emerged as a leader of efforts to build South-South cooperation. In this role, it can set an important example for other middle-income nations and act as a bridge between the northern and southern hemispheres.Publication Knowledge, Technology, and Cluster-Based Growth in Africa(Washington, DC: World Bank, 2008)Although Africa is falling behind in today's global economic race, it holds pockets of vital economic activity -- many in the form of enterprise clusters scattered across the continent's countries and industries. By clustering, enterprises are able to overcome constraints in capital, skills, technology, and markets. Enterprise clusters help their constituents grow and compete by encouraging more effective knowledge and technology diffusion and product specialization, leveraging local comparative advantage, fostering production value chains, and achieving collective efficiency. In so doing, they contribute significantly to Africa's economic growth. They provide jobs for the continent's growing population, thus enabling families not only to survive, but also to educate their children and perhaps move out of poverty. But in today's increasingly knowledge-intensive and globalized economy, these clusters also face serious challenges in the areas of technology, natural resources, infrastructure, skill acquisition, and quality control. This book aims to provide an understanding of how these dynamic enterprise clusters in Africa were formed and have evolved, and how knowledge, human capital, and technology have contributed to their success.Publication Mozambique - Investment Climate Assessment - 2009 : Sustaining and Broadening Growth(World Bank, 2009-10-01)Mozambique's recent history is a rare example of a successful post-conflict recovery and economic takeoff. Emerging from decades of economic stagnation and decline, a consequence first of a failed socialist economic experience and then of a vicious civil war that only ended in 1992, the country has achieved a commendable degree of political stability. This has been accompanied by prudent and stable economic policy continuity, as well as coordinated and ever more efficient use of substantial international aid. These factors have contributed to sustained economic growth that averaged 7.8 percent between 1992 and 2006. Furthermore, this growth has been 'pro-poor': increasing output has been accompanied by real and significant decreases in poverty levels, with the poverty headcount index declining from 69 percent in 1997 to 54 percent in 2003. Based on the enterprise survey results for Mozambique, this report assesses the main obstacles to achieving an investment climate that supports private sector growth and provides policy options for improving the business environment and increasing competitiveness with the goal of achieving sustained and broad-based growth. The focus is on microeconomic constraints and reforms where, according to a recent World Bank report, most of the challenges for sustainable growth are concentrated. Therefore, the analysis presented in this report should be of interest to policy makers, academics, non-governmental organizations and representatives of the private sector involved in the policy dialogue in the country. Improvements to the business environment and increased access to finance are the most critical aspects to firm growth in Mozambique identified in this report. Despite recent progress, the business environment for the Mozambican enterprise sector is still in many ways problematic. Based on econometric evidence as well as on business perceptions and quantitative data, this study indicates that while all aspects of the investment climate are important, reform priorities should focus on increasing access to finance and improving the business environment.
Users also downloaded
Showing related downloaded files
Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication The Container Port Performance Index 2023(Washington, DC: World Bank, 2024-07-18)The Container Port Performance Index (CPPI) measures the time container ships spend in port, making it an important point of reference for stakeholders in the global economy. These stakeholders include port authorities and operators, national governments, supranational organizations, development agencies, and other public and private players in trade and logistics. The index highlights where vessel time in container ports could be improved. Streamlining these processes would benefit all parties involved, including shipping lines, national governments, and consumers. This fourth edition of the CPPI relies on data from 405 container ports with at least 24 container ship port calls in the calendar year 2023. As in earlier editions of the CPPI, the ranking employs two different methodological approaches: an administrative (technical) approach and a statistical approach (using matrix factorization). Combining these two approaches ensures that the overall ranking of container ports reflects actual port performance as closely as possible while also being statistically robust. The CPPI methodology assesses the sequential steps of a container ship port call. ‘Total port hours’ refers to the total time elapsed from the moment a ship arrives at the port until the vessel leaves the berth after completing its cargo operations. The CPPI uses time as an indicator because time is very important to shipping lines, ports, and the entire logistics chain. However, time, as captured by the CPPI, is not the only way to measure port efficiency, so it does not tell the entire story of a port’s performance. Factors that can influence the time vessels spend in ports can be location-specific and under the port’s control (endogenous) or external and beyond the control of the port (exogenous). The CPPI measures time spent in container ports, strictly based on quantitative data only, which do not reveal the underlying factors or root causes of extended port times. A detailed port-specific diagnostic would be required to assess the contribution of underlying factors to the time a vessel spends in port. A very low ranking or a significant change in ranking may warrant special attention, for which the World Bank generally recommends a detailed diagnostic.Publication Using Immunization Coverage Rates for Monitoring Health Sector Performance : Measurement and Interpretation Issues(World Bank, Washington, DC, 2000-08)Immunization against childhood diseases such as diphtheria, pertussis, tetanus, polio and measles is one of the most important means of preventing childhood morbidity and mortality. Despite the low cost of basic childhood immunizations, nearly 3 million children still die each year from vaccine-preventable diseases. Achieving and maintaining high levels of immunization coverage must therefore be a priority for all health systems. In order to monitor progress in achieving this objective, immunization coverage data can serve as an indicator of a health system's capacity to deliver essential services to the most vulnerable members of a population. This note discusses the use of trends in immunization coverage data, and argues that immunization is a health output with a strong impact on child morbidity, child mortality and permanent disability. This note discusses measurement and interpretation issues for coverage data collected through surveys and administrative records.Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.