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Korea and the BICs (Brazil, India and China) : catching up experiences
 
Author:V. Chandra; Osorio-Rodarte , I.; Braga, C. A. Primo; Collection Title:Policy Research working paper ; no. WPS 5101
Country:Brazil; Korea, Republic of; China; India; Date Stored:2009/10/27
Document Date:2009/10/01Document Type:Policy Research Working Paper
Language:EnglishRegion:East Asia and Pacific; South Asia; Latin America & Caribbean
Report Number:WPS5101SubTopics:Economic Theory & Research; Water and Industry; Knowledge for Development; Labor Policies; E-Business
Volume No:1 of 1  

Summary: This paper tests a neo-Schumpeterian model with industry-level data to analyze how Brazil, India, and China are catching up with South Koreaメs technological frontier in a globalized world. The paper validates Aghion et al.メs inverted-U hypothesis that industries that are closer to the technological frontier innovate to escape competition while longer distances discourage innovating. It suggests that for effective catching up, distance-shortening (or innovation-enhancing) policies may be a necessary complement to liberalization. South Korea and China combined a variety of distance-shortening policies with financial subsidies to promote high tech industries and an export-led growth strategy. Post-liberalization, they leveraged swift competition to spur catch-up. In comparison, Brazil, which was as rich as South Korea, and India, which was as rich as China in 1980, are catching up more slowly. Import-substitution industrialization strategies saddled Brazil and India with a large anti-export bias, and unfocused attention to innovation-enhancing policies dampened global competitiveness. Post liberalization, many of their industries were too far behind the technological frontier to effectively benefit from competition. The catch-up experiences of Brazil, India, and China with South Korea illustrate that distance from the technological frontier matters and that the design of country-specific distance- shortening policies can be an important complement to trade liberalization in promoting catching up with richer countries.

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