Citation

Discussion Paper Details

Please find the details for DP3356 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Economic Development as Self Discovery

Author(s): Ricardo Hausmann and Dani Rodrik

Publication Date: May 2002

Keyword(s): development and industrial policy

Programme Area(s): International Trade and Regional Economics and Public Economics

Abstract: In the presence of uncertainty about what a country can be good at producing, there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated. We develop a general-equilibrium framework for a small open economy to clarify the analytical and normative issues. We highlight two failures of the laissez-faire outcome: there is too little investment and entrepreneurship ex ante, and too much production diversification ex post. Optimal policy consists of counteracting these distortions: to encourage investments in the modern sector ex ante, but to rationalize production ex post. We provide some informal evidence on the building blocks of our model.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3356

Bibliographic Reference

Hausmann, R and Rodrik, D. 2002. 'Economic Development as Self Discovery'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3356