【 journal of chinese economic and business studies】 industrial policies for avoiding the middle-ag官网

economic development is a process of structural transformation with continuous technological innovation and industrial upgrading, which increases labor productivity, and accompanied improvements in infrastructure and institution, which reduces transaction costs. the middle-income trap is a result of amiddle-income country’s failure to have a faster labor productivity growth through technological innovation and industrial upgrading than high-income countries. industrial policy is essential for the government of a middle-income country to prioritize the use of its limited resources to facilitate technological innovation and industrial upgrading by overcoming inherent externality and coordination issues in structural transformation. the industries in a middle-income country may be classified into five different types, depending on their distance to the global technology frontier: catching-up industries, leading-edge industries, comparative advantage-losing industries, short innovation cycle industries, and comparative advantage-defying strategic industries. industrial policy should be designed accordingly.

keywords: new structural economics,economic development,middle-incometrap,industrial policy