Industrial Structure and Development: Hunting for the "Flying Geese" : A Cross-Country Analysis of Patterns of Specialization in the Manufacturing Industry, 1976-2004

Abstract

This is a study searching for proof of universal patterns of structural change in the process of development. More specifically what is pursued answered is: Is there a universal pattern of structural change, so that at a particular income level, a country has a particular pattern of manufacturing production? While it is known that low-skill sectors such as clothing tends to be located in low- or middle-income countries, and high-skilled sectors such as electrical machinery tends to be located in high-income countries, a systematic study spawning the whole range of industrial sectors in the search for universal cyclicality, is missing. This study, thus econometrically with use of the software Stata, searches for evidence of inverse U`s in empirical data covering 86 countries and 28 manufacturing sectors, from 1976-2004. Hence a main question is whether there is a general (inverse) U-shaped pattern of industrial development, similar to the Kuznets-Curve of inequality.

Potential explanations for such developments is surveyed to find out why this should be the case. Well known theories like Vernon`s product cycle theory and theories of economic geography, as well as the more unknown Asian theories by Akamatsu and Kojima, are considered. All share a fascination of the Asian “miracle economies”. As Akamatsu`s flying geese theory is so famous in Asia while almost unknown in the West, the largest emphasis will be on this theory as a contribution to the increased knowledge of Asian economic theories. Another contribution is adding to the discussion of measuring specialization and relative importance in sectors.

The main trend seen from the empirical evidence and the econometrical analysis is the clear cyclicality in all type of sectors, irrespective of technology level and degree of sophistication. Cyclicality was found as expected in Low-Tech sectors, but they were found in the more technology intensive sectors too - and surprisingly to a larger extent. This is an important finding because technology barriers, knowledge specificity and other aspects of production and trade tying sectors to specific locations, seems to work less restrictively than assumed. Type of sectors and changes between sectors thus seem to matter, even as the alternative approach of within-sector change and firm heterogeneity has convincingly been proven. Such structural change is not in any way dismissed, but the focus in this study has been on the classical sector approach. To what extent there also exists structural change within sectors, is a hypothesis not tested. This study`s contribution is that sectors still matter: "What it is most appropriate for you to make, will change over time as income grows”. Seemingly, there is indeed an industrial hierarchy.