On the importance of openness for industrial policy design in developing countries
AbstractShould industrial policy be targeted to a few sectors or be more broad based and therefore more neutral? Our theoretical analysis demonstrates that access to foreign markets is key to answering this question. We show that in a less open economy, industrial policy should be targeted, while in a more open economy, broad based policies are likely to be more effective. One implication of this results is that deregulation is likely to be more successful in a relatively open economy than in a more closed economy. Indeed, deregulation with limited foreign market access may lead to deindustrialization. We provide empirical results that support these predictions.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari in its series series with number 0014.
Date of creation: Feb 2007
Date of revision: Feb 2007
Industrialization; policy design; policy reform; economic growth; openess;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
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