Many poor countries become richer by focusing on manufacturing. However, as wages rise, the ability to compete solely on cost becomes harder, and global manufacturers tend to move factories to cheaper countries. The “middle-income trap,” in which a nation’s growth stalls, has plagued all but a handful of countries that have pursued industrialization as a route to growth. Should countries fight to keep manufacturing jobs or switch to promoting their service sectors? New evidence from academics Dan Su and Yang Yao of Peking University suggests that manufacturing is still crucial to economic development. getAbstract recommends their thoughtful argument to economists and policy makers.
In this summary, you will learn
- Why manufacturing is important for middle-income countries,
- How manufacturing supports growth in the service sector and
- Why policy makers should avoid “premature deindustrialization.”
About the Authors
Dan Su is a researcher at the National School of Development, Peking University, where Yang Yao is the dean.