The Great Depression and Industrialization in Colombia

by David S. C. Chu

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Reviews growth of manufacturing sector in Colombia during the period 1930-45. There was a marked change in the pattern of industrial development after 1930. Relative to GNP, "nontraditional" manufacturing grew more rapidly than it had in the 1920s. Import substitution became the basic source of growth, with a few sectors accounting for most of the increase. In contrast to the model advanced by Hollis Chenery--that manufacturing develops in a regular pattern relative to GNP--it appears that Colombia's industrial sector responded to changes in the relative prices of outputs and material inputs brought about by the depression. Unlike import substitution industrialization of post-World War II years, this growth produced a fairly efficient industrial establishment. The policy lesson to be learned is that indigenous private entrepreneurs can be responsive to price incentives, and their judgment in selecting truly profitable opportunities may be superior to that of central planners. 60 pp. Ref.

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