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Comments on “New Structural Economics” by Justin Yifu Lin

Comments on “New Structural Economics” by Justin Yifu Lin Comments on “New Structural Economics” by Justin Yifu Lin Dani Rodrik Justin Lin wants to make structuralist economics respectable again, and I applaud him for that. He wants to marry structuralism with neoclassical economic reason- ing, and I applaud this idea too. So he has two cheers from me. I withhold my third cheer so I can quibble with some of what he writes. The central insight of structuralism is that developing countries are qualitat- ively different from developed ones. They are not just radially shrunk versions of rich countries. In order to understand the challenges of under-development, you have to understand how the structure of employment and production—in par- ticular the large gaps between the social marginal products of labor in traditional versus modern activities—is determined and how the obstacles that block struc- tural transformation can be overcome. The central insight of neoclassical economics is that people respond to incen- tives. We need to understand the incentives of, say, teachers to show up for work and impart valuable skills to their students or of entrepreneurs to invest in new economic activities if we are going to have useful things to say to governments about what they ought to http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The World Bank Research Observer Oxford University Press

Comments on “New Structural Economics” by Justin Yifu Lin

Rodrik, Dani
The World Bank Research Observer , Volume 26 (2) – Aug 1, 2011
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Publisher
Oxford University Press
Copyright
© The Author 2011. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com
Subject
Symposium on “New Structural Economics”
ISSN
0257-3032
eISSN
1564-6971
DOI
10.1093/wbro/lkr008
Publisher site
See Article on Publisher Site

Abstract

Comments on “New Structural Economics” by Justin Yifu Lin Dani Rodrik Justin Lin wants to make structuralist economics respectable again, and I applaud him for that. He wants to marry structuralism with neoclassical economic reason- ing, and I applaud this idea too. So he has two cheers from me. I withhold my third cheer so I can quibble with some of what he writes. The central insight of structuralism is that developing countries are qualitat- ively different from developed ones. They are not just radially shrunk versions of rich countries. In order to understand the challenges of under-development, you have to understand how the structure of employment and production—in par- ticular the large gaps between the social marginal products of labor in traditional versus modern activities—is determined and how the obstacles that block struc- tural transformation can be overcome. The central insight of neoclassical economics is that people respond to incen- tives. We need to understand the incentives of, say, teachers to show up for work and impart valuable skills to their students or of entrepreneurs to invest in new economic activities if we are going to have useful things to say to governments about what they ought to

Journal

The World Bank Research Observer – Oxford University Press

Published: Aug 1, 2011

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