The Speed of Structural Convergence in the Manufacturing Industries of Newly Industrializing Economies

We seek to identify the determinants of the speed of convergence in the structures of manufacturing to their steady-state levels as developing economies become fully industrialized. Applying a two-stage sequential estimation procedure to data on three-digit manufacturing industries for 45 mostly middle-income countries, we find empirical support for the hypothesis that production efficiency is a major determinant of inter-branch output share adjustment. This finding applies to many but not all industries. One implication for latecomers is that industrial policy must aim at rapid diffusion of core technologies to facilitate the acquisition of industrial capabilities in a diversified basket of exportables.