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Industrial Policies and Growth: Lessons from International Experience

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  • Marcus Noland
  • Howard Pack

Abstract

The application of industrial policies (IP) to direct resources to industries considered preponderant in achieving growth has been the chosen road by many emerging economies to tackle underdevelopment. Subsidized loans, variable taxes and differentiated tariffs are frequently used. Because of the successful experiences of some South Asian industrial policies, other emerging countries feel tempted of replicating the formula. However, these should be sure first that their governments have the necessary competencies. There are also two questions to ask on the role of IPs in the growth of these countries: first, Were IPs the dominant factor in the countries’ accelerated growth? The neoclassical approach offers an alternative explanation, that the Asian miracle was mainly the result of strong macroeconomic policies implemented. The second question is: Can the problems of some Asian economies in the 1990s be explained by the prolonged application of IPs? This article finds evidence to support that economic growth was due to strong macroeconomic foundations, such as fiscal discipline, controlled inflation and adequate real exchange rate levels. These variables were the driving forces that created high levels of saving and investment. On the other hand, the implementation of IPs is difficult in a globalized world where the regulations of international trade have become very important.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 169.

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Date of creation: Jul 2002
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Handle: RePEc:chb:bcchwp:169

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References

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  1. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
  2. Beason, Richard & Weinstein, David E, 1996. "Growth, Economies of Scale, and Targeting in Japan (1955-1990)," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 286-95, May.
  3. Moonsung Kang, 2000. "Patent Infringement and Strategic Trade Policies : R&D and Export Subsidies," Trade Working Papers 21759, East Asian Bureau of Economic Research.
  4. Rob, Rafael, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 655-75, July.
  5. Noland, Marcus, 1996. "Research and Development Activities and Trade Specialization in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 150-168, June.
  6. Horioka, Charles Yuji & Watanabe, Wako, 1997. "Why Do People Save? A Micro-Analysis of Motives for Household Saving in Japan," Economic Journal, Royal Economic Society, vol. 107(442), pages 537-52, May.
  7. Marcus Noland, 2000. "Avoiding the Apocalypse: The Future of the Two Koreas," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 94.
  8. C. Fred Bergsten & Marcus Noland, 1993. "Reconcilable Differences? United States-Japan Economic Conflict," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 34.
  9. Okuno-Fujiwara, Masahiro, 1988. "Interdependence of industries, coordination failure and strategic promotion of an industry," Journal of International Economics, Elsevier, vol. 25(1-2), pages 25-43, August.
  10. Mariko Sakakibara & Michael E. Porter, 2001. "Competing At Home To Win Abroad: Evidence From Japanese Industry," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 310-322, May.
  11. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143.
  12. Marcus Noland, 2004. "Selective Intervention and Growth: The Case of Korea," Working Paper Series WP04-3, Peterson Institute for International Economics.
  13. Lee, Hiro, 1993. "General equilibrium evaluation of industrial policy in Japan," Journal of Asian Economics, Elsevier, vol. 4(1), pages 25-40.
  14. Tetsuji Okazaki, 2000. "Government-Firm Relationship in Postwar Japan: Success and Failure of the Bureau-Pluralism," CIRJE F-Series CIRJE-F-69, CIRJE, Faculty of Economics, University of Tokyo.
  15. Weinstein David E., 1995. "Evaluating Administrative Guidance and Cartels in Japan (1957-1988)," Journal of the Japanese and International Economies, Elsevier, vol. 9(2), pages 200-223, June.
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  17. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  18. Marcus Noland, 1997. "Public Policy, Private Preferences, And The Japanese Trade Pattern," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 259-266, May.
  19. Moonsung Kang, 2000. "Patent Protection and Strategic Trade Policy," Trade Working Papers 21761, East Asian Bureau of Economic Research.
  20. Noland, Marcus, 2000. "The Philippines in the Asian Financial Crisis: How the Sick Man Avoided Pneumonia," MPRA Paper 55665, University Library of Munich, Germany.
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Cited by:
  1. Jorge Marshall R., 2002. "El Camino de las Reformas," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 77-82, April.
  2. Carlos Massad A., 2002. "Articles A Challenges of Economic Growth: an Overview," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 5-10, April.
  3. World Bank, 2005. "Kazakhstan : Country Economic Memorandum, Getting Competitive, Staying Competitive, The Challenge of Managing Kazakhstan's Oil Boom," World Bank Other Operational Studies 8656, The World Bank.
  4. Francisco Rosende R., 2002. "El Desafío del Crecimiento Económico en Chile," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 83-88, April.
  5. Ronald Fischer, . "Trade liberalization in Latin America: The case of Chile," Documentos de Trabajo 190, Centro de Economía Aplicada, Universidad de Chile.

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