Activation of a modern industry

This paper constructs an integrated framework to disentangle the underlying economic mechanism of industrial transformation. We consider three essential elements for the analysis: skill requirements, industry-wide spillovers and degrees of consumption subsistence. We find that human and nonhuman resources, production factor matching and industrial coordination are all important for activating a modem industry. In the process of industrial transformation, job destruction may exceed job creation, and income distribution may get worse immediately following the activation of a modem industry. An array of policy prescriptions for advancing a poor country is provided. (C) 2004 Elsevier B.V. All rights reserved.