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Policies Facilitating Firm Adjustment to Globalization

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  • Hoekman, Bernard
  • Smarzynska Javorcik, Beata

Abstract

This Paper focuses on policies facilitating firm adjustment to globalization. We briefly review the effects of trade and investment liberalization on firms, focusing on within- industry effects. We postulate that governments’ role in supporting the process is to: (i) ensure that firms face ‘right’ incentives to adjust, and (ii) intervene in areas where market failures are present. The main message of the Paper is that while many policies could be adopted to address market failures, they need to be carefully designed and implemented in a stable macroeconomic environment. An institutional infrastructure that supports the functioning of modern markets is most important. Pro-active support policies of whatever stripe should be subject to cost benefit analysis, based on the existence of an identified market failure and monitored for performance and cost effectiveness. Transparency and accountability are critical in ensuring that interventions accomplish their intended objectives rather than being vehicles for rent seeking.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4692.

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Date of creation: Oct 2004
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Handle: RePEc:cpr:ceprdp:4692

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Keywords: adjustment; globalization; government policies;

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Cited by:
  1. Correa, Paulo & Dayoub, Mariam & Francisco, Manuela, 2007. "Identifying supply-side constraints to export performance in Ecuador : an exercise with Investment Climate Survey data," Policy Research Working Paper Series 4179, The World Bank.
  2. Mark Gehlhar & Anita Regmi & Spyro Stefanou & Barry Zoumas, 2006. "Managing Firm Competitiveness in Global Markets," Working Papers, University of Crete, Department of Economics 0714, University of Crete, Department of Economics.

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