Role of industrial growth on economic development: A comparative analysis of developed and developing countries

Abstract

Industrialization has played a pivotal role in shaping economic transformation, influencing growth patterns globally across different stages of development. This study investigates the role of industrialization on economic development by controlling labor force, capital formation, school enerollment, and institutional quality. The panel data of 62 developing and 96 developed countries are collected from World Bank from 1990 to 2023. The empirical results are estimated by using the Panel Quantile Regression (PQR), and its robustness is checked through the Method of Moverment-Quantile Regression (MM-QR) approach. The empirical results found the U-shaped relationship between industrialization and economic development in both samples. The labor force significantly increases economic development in developed countries while declines in developing countries. Gross capital formation and preprimary education also significantly enhance economic development. The institutional quality surges economic development in developed countries and declines in developing countries. The MM-QR approach also shows similar results, proving the PQR approach's robustness. This study recommends that all countries should focus on industrial diversification, improving infrastructure and energy access, strengthening institutions, building a skilled workforce, and ensuring environmental sustainability.