Industrial Policy, Industrial Development, and Structural Transformation in Asia and Africa

Abstract Industrial policy has received renewed interest among researchers and policy makers in recent years because of failed industrial development in the developing world, the only exception being the Asian experiences. Based on simple conceptual framework, we illustrate how industrial policy can contribute to economic growth by enhancing labor productivity and reallocating labor from low-productive to high-productive sectors. Using macroeconomic data from Asian and sub-Saharan African countries, we present a sharp contrast between the two economies. Asian countries successfully achieved economic growth led by the industrialization, particularly in labor-intensive sectors, whereas African economies have long been stagnant, which can be attributed to the failure of industrialization. Finally, we discuss a feasible strategy for industrial development in Africa.