Social Policy and Productive Transformation: Linking Education with Industrial Policy (Draft)

This paper argues that the dynamics of catching up in developing countries is driven by a circular and cumulative process of social and productive transformation. The paper introduces a concept of capabilities which establishes the link between social and productive transformation, and argues that education plays a central role in shaping social capabilities for productive transformation. The analysis shows that the educational attainment structure rather than educational levels are the most significant determinants of the pattern of industrial development and growth. Education policies therefore are not only challenged with achieving basic education goals but also to develop education attainment structures that open up wide opportunities for diversification, technological upgrading and productive transformation. Education must be integrated into a long-term strategy of productive and social transformation that closely coordinates education and industrial policies and provides institutions that coordinate these policies effectively. Finally, the analysis identifies research issues in the area of education policies for generating high performing, job-intensive catching up patterns and processes.

Irmgard Nübler is the Coordinator for the Industrial Policies and Structural Transformation Program at the ILO.