Publication: From Flying Geese to Leading Dragons : New Opportunities and Strategies for Structural Transformation in Developing Countries
Loading...
Date
2011-06-01
ISSN
Published
2011-06-01
Author(s)
Editor(s)
Abstract
Economic development is a process of continuous industrial and technological upgrading in which any country, regardless of its level of development, can succeed if it develops industries that are consistent with its comparative advantage, determined by its endowment structure. The secret winning formula for developing countries is to exploit the latecomer advantage by building up industries that are growing dynamically in more advanced fast growing countries that have endowment structures similar to theirs. By following carefully selected lead countries, latecomers can emulate the leader-follower, flying-geese pattern that has served well successfully catching-up economies since the 18th century. The emergence of large middle-income countries such as China, India, and Brazil as new growth poles in the world, and their dynamic growth and climbing of the industrial ladder, offer an unprecedented opportunity to all developing economies with income levels currently below theirs --including those in Sub-Saharan Africa. Having itself been a "follower goose," China is on the verge of graduating from low-skilled manufacturing jobs and becoming a "leading dragon." That will free up nearly 100 million labor-intensive manufacturing jobs, enough to more than quadruple manufacturing employment in low-income countries. A similar trend is emerging in other middle-income growth poles. The lower-income countries that can formulate and implement a viable strategy to capture this new industrialization opportunity will set forth on a dynamic path of structural change that can lead to poverty reduction and prosperity.
Link to Data Set
Citation
“Lin, Justin Yifu. 2011. From Flying Geese to Leading Dragons : New Opportunities and Strategies for Structural Transformation in Developing Countries. Policy Research working paper ; no. WPS 5702. © World Bank. http://hdl.handle.net/10986/3466 License: CC BY 3.0 IGO.”
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 Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Geopolitical Fragmentation and Friendshoring(Washington, DC: World Bank, 2025-06-26)This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations.Publication Soaring Food Prices Threaten Recent Economic Gains in the EU(Washington, DC: World Bank, 2025-07-02)The surge in food prices following the 2021 economic rebound has become a significant concern for households, particularly low-income ones, in Bulgaria, Croatia, Poland, and Romania. Food price inflation, which surpasses general inflation rates, risks worsening poverty and food insecurity in these countries. This paper explores the distributional impacts of rising food prices and the effectiveness of government response measures. Low-income households, who allocate a larger share of their income to food, are disproportionately affected and are struggling to cope with unexpected expenses, leading to increased difficulties in accessing proper nutrition. Simulations indicate that rising food prices contribute to higher poverty rates and greater income inequality, especially among vulnerable populations. They also suggest that the main poverty-targeted social assistance schemes offer critical support for the extreme poor, but expanding both coverage and benefits is vital to shield all at-risk individuals. Targeted policies that balance immediate relief with long-term resilience-building are essential to addressing the challenges posed by escalating food prices.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Leading Dragons Phenomenon : New Opportunities for Catch-Up in Low-Income Countries(2012-03-01)Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy and occurs through a process of continuous industrial and technological upgrading. Since the 18th century, all countries that industrialized successfully in Europe, North America and East Asia followed their comparative advantage and leveraged the late-comer advantage to emulate the leader-follower flying geese pattern of industrial upgrading. The large dynamic emerging market countries such as China, India and Brazil are also engaged in industrial upgrading but with a critical difference. In particular, because of its sheer size, China has absorbed nearly all labor-intensive jobs and become the world s largest exporter of labor-intensive products. The current view is that China s dominance hinders poor countries from developing similar industries. The authors argue that industrial upgrading has increased wages and is causing China to graduate from labor-intensive to more capital- and technology-intensive industries. These industries will shed labor and create a huge opportunity for lower wage countries to start a phase of labor-intensive industrialization. This process, called the Leading Dragon Phenomenon, offers an unprecedented opportunity to low-income Sub-Saharan Africa where the industrial sector is underdeveloped and investment capital and entrepreneurial skills are leading constraints to manufacturing. It can seize the opportunity and resolve the constraints by attracting some of the OFDI flowing currently from China, India and Brazil into the manufacturing sectors of other developing countries. All low-income countries will compete but to catch the jobs spillover from China, the winner must implement credible economic development strategies that are consistent with its comparative advantage.Publication Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America(World Bank, Washington, DC, 2012-08)This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Growth Identification and Facilitation Framework to help Latin America escape the middle-income trap. Countries in Latin America and the Caribbean are caught in a middle-income trap due to their inability to structurally upgrade from low value-added to high value-added products. Governments in Latin America and the Caribbean should intervene in industries in which they have a comparative advantage, calibrating supporting policies in close collaboration with the private sector through public-private sector alliances. Through continuous structural upgrading in sectors intensive in factors such as natural resources, scientific knowledge, and unskilled labor, the region could achieve dynamic growth. This would require investments in education, research and development, and physical infrastructure. Therefore, industrial upgrading and diversification would be essential to avoid further de-industrialization arising from the competitive pressures of the rise of China, broaden the base for economic growth, and create the basis for further sustained reduction in unemployment, poverty and income inequality. Failure to do so would lead to a loss of competitiveness and risks of further de-industrialization.Publication How to Avoid Middle Income Traps : Evidence from Malaysia(World Bank, Washington, D.C., 2013-04)Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters in the world. However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.Publication Local Gains from Global Opportunities : Improving Central America's Investment Climate(Washington, DC, 2008-09)Central America's economic performance in recent years has benefited from improved macroeconomic management, a favorable external environment, as well as rising investor confidence since the region has pursued greater access to global markets, particularly with the signing Dominican Republic, Central American Free Trade Agreement (DR-CAFTA) in 2004. Nonetheless, while important reforms have been made, much remains to be done, and the context of a less favorable global environment underlines the urgent need to improve competitiveness and enhance productivity. An improving investment climate will contribute to both. This chapter discusses the broad economic factors that shape the investment climate in Central America. Section one describes the overall strategic context, highlighted by the opportunities and challenges emerging from the new trade deal. Section two discusses the region's macroeconomic environment, economic growth, sectoral changes, the business cycles with the US, and overall stability. Section three covers trade, financial and remittances flows, which are particularly important to the region. Section four summarizes and takes a look ahead.Publication Cluster-Based Industrial Parks : A Practical Framework for Action(2011-12-01)They are being hailed as the new Holy Grail of economic development. The success of special economic zones (SEZ) in general and specialized ones in particular (industrial and technology parks) in countries as diverse as Australia, Denmark, Sweden, Germany, Switzerland, Ireland, Japan, the United Kingdom, the United States, and more recently, China; Korea; Taiwan, China; or Mauritius, has led several African leaders to launch new similar initiatives. This paper establishes a common point of reference for those who believe in the virtues of SEZs, explains why the many existing ones have not delivered the expected outcomes, and summarizes the key issues on the agenda. It then suggests cluster-based industrial parks as the most effective tool for developing competitive industries and generating employment, and provides some practical guidance to development practitioners and policymakers on the road ahead.
Users also downloaded
Showing related downloaded files
Publication Breaking the Conflict Trap : Civil War and Development Policy(Washington, DC: World Bank and Oxford University Press, 2003)Most wars are now civil wars. Even though international wars attract enormous global attention, they have become infrequent and brief. Civil wars usually attract less attention, but they have become increasingly common and typically go on for years. This report argues that civil war is now an important issue for development. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap in which war wrecks the economy and increases the risk of further war. The global incidence of civil war is high because the international community has done little to avert it. Inertia is rooted in two beliefs: that we can safely 'let them fight it out among themselves' and that 'nothing can be done' because civil war is driven by ancestral ethnic and religious hatreds. The purpose of this report is to challenge these beliefs.Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.