Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies

Manufacturing as the Key Engine of Economic Growth for Middle-Income Economies

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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.


The importance of technology and information to the global economy raises questions as to whether manufacturing should remain the chief route for a nation’s economic advancement. In developing countries, policy makers have historically preferred to promote manufacturing over services, as the former is more easily integrated into global trade, offers the prospect of foreign technological investment, and quickly benefits from scale and specialization. But with an improved technical infrastructure and ever-greater trade in services, a second route to growth – through...

About the Authors

Dan Su is a researcher at the National School of Development, Peking University, where Yang Yao is the dean.

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