INDUSTRIALIZATION IN DEVELOPING COUNTRIES: SOME EVIDENCE FROM A NEW ECONOMIC GEOGRAPHY PERSPECTIVE

The paper draws broad predictions from the developmental elements of new economic geography models and subjects them to empirical scrutiny. Industrial activity has spread from developed to geographically close developing countries in sectors that are intensive in immobile primary factors and not too heavily dependent on linkages with other firms. Only developing countries with an already established industrial base achieved industrialization in other sectors. The sizable change in both the size and structure of manufactured exports from developing countries has not been associated with corresponding changes in manufacturing value added. To benefit more from relocating industrial activities, developing countries need to create the critical mass of linkages that provide pecuniary externalities to industrial firms.