the economics profession to reexamine the validity of some of its existing knowledge, including on development thinking. The new structural economics approach also stresses the need to update the research agenda on key issues and questions about development paradigms.

In the past decade, the World Bank has initiated a number of research projects to draw lessons from successful economies’ experiences. These projects, which include the _East Asian Miracle_ (World Bank 1993), _Growth in the 1990s_ (World Bank 2005b), and _Growth Report_ (World Bank 2008), have produced many useful stylized facts for determining the success or failure of economic development. The proposed new structural economics is a continuation of that effort and attempts to develop a general framework for understanding the causality behind the observed stylized facts.<sup>36</sup> Specifically, the new structural economics proposes to: (i) develop an analytical framework that takes into account factor and infrastructure endowments, the stages of development, and the corresponding industrial, social, and economic structures of developing countries; (ii) analyze the roles of the state and the market at each development stage, and the mechanics of the transition from one stage to another; and (iii) focus on the causes of economic distortions and the government’s strategies for exit from the distortions.

The proposed new approach is not an attempt to substitute another ideologically-based policy framework for those that have dominated development thinking in past decades, yet showing little connection to the empirical realities of individual countries. Rather, it is an approach that brings attention to the endowment structure and stage of development of each country, and suggests a path toward country-based research that is rigorous, innovative and relevant to development policy. This framework stresses the need to better understand the implications of structural differences at various stages of a country’s development—especially in terms of the appropriate institutions and policies, and the constraints and incentives for the private sector in the process of structural change. It also raises several questions for researchers in academia and international and national development agencies: What are the institutions and policies appropriate for countries at different stages of development? How can the market and the state play their respective roles to facilitate the efficient allocation of resources and smooth transition from one type of industrial structure to another? What advice should be given to developing countries trying to move from an environment characterized by distortions to a first-best world determined by the country’s stage of development? How do we ensure that such transitions work well?

As one of the largest and most productive development research teams in the world, the World Bank’s Research Department is a major producer of development thinking, cross-country data, analytic tools and policy advice that are directly applicable to operational issues and in high demand by governments, development partners and civil society. Its research has developed a heavily sector-based approach because it responds to concrete questions and specific gaps in the understanding of the development process. This is also due to the fact that the World Bank today

> 36 The _Growth Report_ presents lessons from 13 cases of high and sustained growth in the post-war period. Its observes the following five stylized facts about all of them:  (i) They fully exploited the world economy; (ii) They maintained macroeconomic stability; (iii) They mustered high rates of saving and investment; (iv) They let markets allocate resources; and (v), They had committed, credible, and capable governments. From the perspective of new structural economics, the first three stylized facts are the results of the adoption of a strategy that is consistent with comparativeadvantage.  The fourth one is a necessary condition to be fulfilled by a country following its comparative advantage. The last one is characteristic of a facilitating state and also a condition for an economy to adopt a comparativeadvantage following strategy in its development process. See further discussions in Lin (2009a).

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