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Since the industrial sectors of LDCs tend to be highly concentrated, productivity enchancing activities of individual firms generate significant demand spillovers. This paper offers a theoritical analysis of how these demand spillovers and industrial productivity growth are related. Conglomeration is shown to lead a paretoimprovment. It is also shown that Statckelberg leadership by one of the sectors would result in an outcome that dominates the Nash outcome. It is sugessted that the strategy of industrialization followed by Japan and South Korea could, perhaps, be interpreted in the light of the above results.
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