Advertisement

Development

, Volume 58, Issue 4, pp 500–510 | Cite as

Inclusive Industrialization and Entrepreneurship

Thematic Section

ABSTRACT

Industrialization does not necessarily lead to inclusive development. The ‘trickle-down’ effect that is implicit in many theoretical models seems inadequate given persistent and even rising income inequalities. In this article, we ask why the expectation that industrialization will achieve a ‘more equal income distribution’ does not often materialize, and provide an answer by analyzing the nature of entrepreneurial-driven technological innovation. We conclude with a set of policy recommendations.

KEYWORDS

development entrepreneurship industrialization inequality innovation technology 

Notes

Acknowledgements

This article draws extensively on an earlier working paper (Naudé and Nagler, 2015) that was prepared as a background document for Chapter 4 of the UNIDO’s Industrial Development Report 2016 (UNIDO, 2015). We are grateful to various participants of the UNIDO’s Expert Group Meetings on the Preparation of the Industrial Development Report 2016 for their comments and suggestions on our inputs into the report. The usual disclaimer applies.

References

  1. Acemoglu, Daron (2003) ‘Technology and Inequality’, NBER Reporter. Winter.Google Scholar
  2. Acemoglu, Daron and David Autor (2012) ‘What Does Human Capital Do? A Review of Goldin and Katz’s The Race Between Education and Technology’, Journal of Economic Literature 50(2): 426–463.CrossRefGoogle Scholar
  3. Allen, Robert C. (2012) ‘Technology and the Great Divergence: Global Economic Development Since 1820’, Explorations in Economic History 49(1): 1–16.CrossRefGoogle Scholar
  4. Anand, Rahul, Saurabh Mishra and Shanaka J. Peiris (2013) ‘Inclusive Growth Revisited: Measurements and Determinants’, Economic Premise, No. 122, July, The World Bank.Google Scholar
  5. Atkinson, Anthony B., Thomas Piketty and Emmanuel Saez (2011) ‘Top Incomes in the Long Run of History’, Journal of Economic Literature 49(1): 3–71.CrossRefGoogle Scholar
  6. Atkinson, Anthony B. (2010) Ensuring Social Inclusion in Changing Labour and Capital Markets, Mimeo, Oxford: Nuffield College.Google Scholar
  7. Autor, David H., Lawrence F. Katz and Alan B. Krueger (1999) ‘Computing Inequality: Have Computers Changed the Labor Market?’, Quarterly Journal of Economics 113(4): 1169–1214.CrossRefGoogle Scholar
  8. Banerjee, Abhijit V. and Andrew F. Newman (1993) ‘Occupational Choice and the Process of Development’, Journal of Political Economy 101(2): 274–298.CrossRefGoogle Scholar
  9. Baker, Dean (2012) ‘Technology Doesn’t Cause Inequality – Deliberate Policy Change Does’, The Guardian, 16 July.Google Scholar
  10. Beaudry, Paul, David A. Green and Benjamin M. Sand (2013) ‘The Great Reversal in the Demand for Skill and Cognitive Tasks’, NBER Working Paper No. 18901. National Bureau for Economic Research.Google Scholar
  11. Bénabou, Roland (2005) ‘Inequality, Technology, and the Social Contract’, in Philippe Aghion and Steven Durlauf (eds.), Handbook of Economic Growth Vol. 1B (pp. 1595–1638). Amsterdam: North Holland.Google Scholar
  12. Bivens, John and Lawrence Mishel (2013) ‘The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes’, Journal of Economic Perspectives 27(3): 57–78.CrossRefGoogle Scholar
  13. Brunori, Paolo, Francisco H. G. Ferreira and Vito Peragine (2013) ‘Inequality of Opportunity, Income Inequality and Economic Mobility: Some International Comparisons’. IZA Discussion Paper No. 7155.Google Scholar
  14. Brynjolfsson, Erik and Andrew McAfee (2012) ‘Thriving in the Automated Economy’, The Futurist, March–April, 27–31.Google Scholar
  15. Brynjolfsson, Erik and Andrew McAfee (2014). The Second Machine Age, New York: W.W. Norton.Google Scholar
  16. Canidio, Andrea (2013) ‘The Technological Determinants of Long-Run Inequality’. Central European University. Mimeo.Google Scholar
  17. Card, David and John E. DiNardo (2002) ‘Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles’, Journal of Labor Economics 20(4): 733–783.CrossRefGoogle Scholar
  18. Comin, Diego and Marti Mestieri (2013)’ ‘If Technology Has Arrived Everywhere, Why Has Income Diverged?’. Mimeo. Harvard University.Google Scholar
  19. Cowen, Tyler (2014) ‘How Technology Could Help Fight Income Inequality’, New York Times, 6 December.Google Scholar
  20. Culey, Sean (2012) ‘Transformers: Supply Chain 3.0 and How Automation Will Transform the Rules of the Global Supply Chain’, The European Business Review, November.Google Scholar
  21. Davies, James B., Susanna Sandström, Anthony Shorrocks and Edward N. Wolff (2011) ‘The Level and Distribution of Global Household Wealth’, Economic Journal 121(551): 223–254.CrossRefGoogle Scholar
  22. Fagerberg, Jan, David C. Mowery and Richard R. Nelson (eds.) (2005) The Oxford Handbook of Innovation. Oxford: Oxford University Press.Google Scholar
  23. Ferreira, Francisco H.G., Christoph Lakner, Maria Ana Lugo and Berk Özler (2014) ‘Inequality of Opportunity and Economic Growth: A Cross-Country Analysis’. IZA Discussion Paper No. 8243. Google Scholar
  24. Frey, Carl Benedikt and Michael A. Osborne (2013) ‘The Future of Employment: How Susceptible are Jobs to Computerization?, Oxford Martin Programme on the Impacts of Future Technology, University of Oxford.Google Scholar
  25. Gancia, Gino A. (2012) ‘Globalization, Technology and Inequality’, Els Opuscles del Crei, Barcelona.Google Scholar
  26. Goldin, Claudia and Lawrence F. Katz (1998) ‘The Origins of Technology-Skill Complementarity’, Quarterly Journal of Economics 113(3): 693–732.CrossRefGoogle Scholar
  27. Gries, Thomas and Wim Naudé (2010) ‘Entrepreneurship and Structural Economic Transformation’, Small Business Economics Journal 34(1): 13–29.CrossRefGoogle Scholar
  28. Hidalgo, Antonio, José Molero and Gerardo Penas (2010) ‘Technology and Industrialization at the Take-Off of the Spanish Economy: New Evidence Based on Patents’, World Patent Information 32(1): 53–61.CrossRefGoogle Scholar
  29. Kaldor, Nicholas (1957) ‘A Model of Economic Growth’. Economic Journal 69(268): 591–624.CrossRefGoogle Scholar
  30. Kanbur, Ravi (2000) ‘Income Distribution and Development’, in Anthony B. Atkinson and François Bourguignon (Eds.), Handbook of Income Distribution Vol. 1A (pp. 791–841). Amsterdam: North Holland.CrossRefGoogle Scholar
  31. Karabarbounis, Loukas and Brent Neiman (2014) ‘The Global Decline of the Labor Share’, Quarterly Journal of Economics 129(1): 61–103.CrossRefGoogle Scholar
  32. Khanna, Parag (2013) ‘The End of the Nation-State?’, The New York Times, 12 October.Google Scholar
  33. Kierzenkowski, Rafal and Isabell Koske (2012) ‘Less Income Inequality and More Growth – Are They Compatible? Part 8: The Drivers of Labour Income Inequality – A Literature Review’. OECD Economics Department Working Papers No. 931.Google Scholar
  34. Kuznets, Simon (1955) ‘Economic Growth and Income Inequality’, American Economic Review 45(1): 1–28.Google Scholar
  35. Lazonick, William (2014) ‘Profits without Prosperity’, Harvard Business Review, September.Google Scholar
  36. Lazonick, William, Philip Moss, Hal Salzman and Öner Tulum (2014) ‘Skill Development and Sustainable Prosperity: Cumulative and Collective Careers versus Skill-Biased Technical Change’. Working Paper No. 7, Institute for New Economic Thinking.Google Scholar
  37. Levy, Frank and Peter Temin (2007) ‘Inequality and Institutions in 20th Century America’. VOX CEPR’s Policy Portal, 15 June.Google Scholar
  38. Marsh, Peter (2012) The New Industrial Revolution: Consumers, Globalization and the End of Mass Production, New Haven: Yale University Press.Google Scholar
  39. McAfee, Andrew and Erik Brynjolfsson (2012) ‘Big Data: The Management Revolution’, Harvard Business Review, October: 60-68.Google Scholar
  40. Mishel, Lawrence, Jared Bernstein and Heidi Shierholz (2009) The State of Working America, 2008/2009, Ithaca, NY: Cornell University Press.Google Scholar
  41. Mishel, Lawrence (2011) ‘Education is Not the Cure for High Unemployment’. EPI Briefing Paper No. 286, Economic Policy Institute.Google Scholar
  42. Mishel, Lawrence and Kar-Fai Gee (2012) ‘Why Aren’t Workers Benefitting from Labour Productivity Growth in the United States?’, International Productivity Monitor Spring (23): 32–43.Google Scholar
  43. Mishel, Lawrence, John Schmittand Heidi Shierholz (2014) ‘Wage Inequality: A Story of Policy Choices’, New Labor Forum, August: 1–6.Google Scholar
  44. Mishel, Lawrence, Heidi Shierholz and John Schmitt (2013) ‘Don’t Blame the Robots: Assessing the Job Polarization Explanation of Growing Wage Inequality’, EPI-CEPR Working Paper, 19 November.Google Scholar
  45. Naudé, Wim and Paula Nagler (2015) ‘Industrialisation, Innovation, Inclusion’. UNU-MERIT Working Paper No. 2015-43, United Nations University.Google Scholar
  46. OECD (2011) Divided We Stand: Why Inequality Keeps Rising. Paris: Organization for Economic Development and Cooperation.Google Scholar
  47. OECD (2014) How was Life? Global Well-Being Since 1820. Paris: Organization for Economic Development and Cooperation.Google Scholar
  48. Ostry, Jonathan D., Andrew Berg and Charalambos G. Tsangarides (2014) ‘Redistribution, Inequality and Growth’. IMF Discussion Note SDN/14/02. Washington, DC: International Monetary Fund.Google Scholar
  49. Piketty, Thomas (2006) ‘The Kuznets Curve: Yesterday and Tomorrow’, in Abhijit Vinayak Banerjee, Roland Bénabou and Dilip Mookherjee (eds.), Understanding Poverty. Cambridge: Cambridge University Press.Google Scholar
  50. Piketty, Thomas, Emmanuel Saez and Stefanie Stantcheva (2011) ‘Taxing the 1%: Why the Top Tax Rate Could be Over 80%’. VOX CEPR’s Policy Portal, 8 December.Google Scholar
  51. Piketty, Thomas (2013) Capital in the Twenty-First Century, Cambridge, MA: Harvard University Press.Google Scholar
  52. Pritchett, Lant (1997) ‘Divergence, Big Time’, Journal of Economic Perspectives 11(3): 3–17.CrossRefGoogle Scholar
  53. Rodriguez, Francisco and Arjun Jayadev (2010) ‘The Declining Labor Share of Income’, Human Development Research Paper No. 2010/36. UNDP.Google Scholar
  54. Rosenstein-Rodan, Paul Narcyz (1943) ‘Problems of Industrialisation of Eastern and South-Eastern Europe’, Economic Journal 53(210–211): 202–211.CrossRefGoogle Scholar
  55. Schumpeter, Joseph A. (1934) The Theory of Economic Development. Cambridge, MA: Harvard University Press (translated by Opie, R.).Google Scholar
  56. Stewart, Frances (2014) ‘Why Horizontal Inequalities are Important for a Shared Society’, Development 57(1): 46–54.CrossRefGoogle Scholar
  57. Stiglitz, Joseph E. (2012) The Price of Inequality, New York: W.W. Norton.Google Scholar
  58. Stokes, David (2014) ‘Technology Innovation the New Currency of the Digital Age’, The European Business Review, November.Google Scholar
  59. Szirmai, Adam (2012) ‘Industrialization as an Engine of Growth in Developing Countries, 1950–2005’, Structural Change and Economic Dynamics 23(4): 406–420.CrossRefGoogle Scholar
  60. The Economist (2014) ‘The History of Inequality: Breaking the Camel’s Back’, The Economist, 4 October.Google Scholar
  61. UNCTAD (2012) ‘Policies for Inclusive and Balanced Growth. Trade and Development Report 2012’. Geneva: United Nations Conference on Trade and Development.Google Scholar
  62. UNCTAD (2014) ‘The Least Developed Countries Report 2014’. Geneva: United Nations Conference on Trade and Development.Google Scholar
  63. UNIDO (2015) Industrial Development Report 2016: ‘The Role of Technology and Innovation in Inclusive and Sustainable Industrial Development’. Vienna: United Nations Industrial Development Organization.Google Scholar
  64. Van Zanden, Jan Luiten, Joerg Baten, Peter Foldvari and Bas Van Leeuwen (2014) ‘The Changing Shape of Global Inequality, 1820–2000: Exploring a New Dataset’, Review of Income and Wealth 60(2): 279–297.CrossRefGoogle Scholar
  65. Wolff, Edward N. (2012) ‘Changes in Household Wealth in the 1980s and 1990s in the US’, in Edward Wolff (ed.) International Perspectives on Household Wealth. Cheltenham: Edward Elgar.Google Scholar
  66. Zeira, Joseph (2008) ‘Machines as Engines of Growth’. Unpublished, Department of Economics, Hebrew University of Jerusalem.Google Scholar

Copyright information

© Society for International Development 2016

Authors and Affiliations

  1. 1.Maastricht School of Management and Maastricht UniversityMaastrichtThe Netherlands
  2. 2.Erasmus Research and Business SupportErasmus UniversityRotterdamThe Netherlands
  3. 3.UNU-MERIT/MGSoGMaastrichtThe Netherlands

Personalised recommendations