Re-Examining the Development of Hirschman’s Linkage Analysis with Detection of Smithian Flavor

Abstract

ABSTRACTHirschman’s production linkage (PL) framework has enjoyed a revival of interest since the 1980s, but its complexity and richness have been continually underappreciated. This paper clarifies these, especially the role played by joint PLs, and includes some Smithian flavor, in that the activation of PLs is analogous to extending the division of labor in an economy, and can raise productivity and augment wealth accumulation à la Smith. Consumption linkages (CLs) add demand-side considerations and could reinforce the cumulative nature of joint PL by endogenizing market-size expansion. Barriers posed by ‘technological strangeness’ could prevent PL activation and warrant the use of industrial/technology policies. Hirschman also recommended sensible import substitution, interweaved with export promotion. These policies are examples of fiscal linkages that accord a role for the state to support PL and CL activation. Brief comparisons and contrasts are made with the global value chain research framework. Applying Hirschman’s framework to conduct case studies entails interdisciplinary research into details of socioeconomic settings associated with the success or failure of development. The concepts of complementarities and external economies are central, although there are additional dimensions to be studied and interfaces between them to be explored.