The benefits of being late? – An empirical analysis on the validity of the concept of "Advantages of Backwardness"

Abstract

The study investigates the validity of the so called concept of "Advantages of Backwardness", which is a controversial theory within the field of Development Economics. It positively frames the opportunities of less developed countries and puts forward arguments reasoning why less developed countries benefit economically from their current status through foreign technology, R&D and foreign markets accessible for trade. This study places this concept into the context of established economic theories, such as the Solow Growth model and the concept of Export-led Growth. Further, it attempts to find empirical support from a multivariable regression analysis on cross-sectional macroeconomic data from developing countries. It was concluded that neither advantages of backwardness nor its weaker version of limited advantages of backwardness could be observed. Nevertheless, globalized nations, which presumable use newest technologies developed in other parts of the world, experience a smaller degree of economic drawbacks. This tendency ultimately follows the notion of “advantages of backwardness” but is not capable to explain “growth miracles”, which have taken place in past decades.