are moved by the common factor, decreased competitiveness vis a vis late-starting countries. Yamazawa (1984, Ch.4 and 5) provides empirical verifications of these mechanism underlying the CPC development of textile and steel industries.

How do government policies affect the CPC development? They either accelerate or decelerate the CPC differently at each phase of CPC development. At introductory phase government can encourage local or foreign firms to initiate new industries by means of subsidies or tax exemption. Governments even dare to establish a state enterprise to start new industry and finance the unavoidable loss at the beginning as is often the case in such strategic industries like iron and steel.

At the two import phases, import substitution and reverse import, government support domestic production by affecting the competition between domestic product and import, but their aims should be different between the two phases. At the import substitution phase governments promote import substitution by restricting import or giving subsidy to domestic producers. This is the case for infant industry protection. On the other hand, at the reverse import phase governments assist the adjustment of domestic production to the increase of import by import restriction or production subsidy. This is the case for protection based on adjustment costs, but in the long run increase of import should not be deterred.

At both the export and mature phase governments can affect much less the CPC. Some governments promote the start of export of new products with subsidy but it will be costly to continue the export subsidy for long. It goes without saying, however, that the main mechanism for the CPC development is market forces such as demand growth and decreasing cost. There are two variations of it as illustrated in Fig. 3. (f.n.3)

## Linkage to other industries : Variation 1

Akamatsu (1943) observed the CPC development of one industry repeated in other industries as well. Diagramatically they are illustrated by other sets of the import, production, and export curves superimposing the first set (in terms of Panel A of Fig. 1), or another industry life cycle curve (S/D curve) superimposing the first one (in terms of Panel C of Fig. 1), with some time lags along the same time scale (Fig. 3 Panel A). He named it a variation of CPC after the overlap of curves. Here is another resemblance to the flock formation of flying wild-geese. But the relation between the first CPC and succeeding CPCs implies more economic meaning than its mere resemblance of their shapes. The link of one with other industries reflects the mechanism underlying the diversification of production structure in the process of industrialization.

Fig. 4 shows Variation 1 of the CPC development in Japan by the life cycle curves (S/D) of four industries -- cotton textiles, steel products, automobiles, and industrial machinery. The development process of textile is representative of labour-intensive light industries, whereas the development pattern of steel products represents those of artificial dyestuff, chemical fertilizers, and textile machinery industry. Automobiles and industrial machinery are representative of the postwar export-oriented industries. By looking at the graph from left to right, that is, by drawing a vertical line at the end of every decade, it is possible to see which industry have reached the export phase and which industry are still in the import substitution phase. As one moves rightward, the production and export structures become