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Industrial Policy for the Twenty-First Century

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Rodrik, Dani (Harvard U)

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Abstract

Unlike what is commonly believed, the last two decades have not witnessed the twilight of industrial policy. Instead, incentives and subsidies have been refocused on exports and direct foreign investment, in the belief that these activities are the source of significant positive spillovers. The challenge in most developing countries is not to rediscover industrial policy, but to redeploy it in a more effective manner. This paper lays out an institutional framework for accomplishing this objective. A central argument is that the task of industrial policy is as much about eliciting information from the private sector on significant externalities and their remedies as it is about implementing appropriate policies. The right model for industrial policy is not that of an autonomous government applying Pigovian taxes or subsidies, but of strategic collaboration between the private sector and the government with the aim of uncovering where the most significant obstacles to restructuring lie and what type of interventions are most likely to remove them.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp04-047.

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Date of creation: Nov 2004
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Handle: RePEc:ecl:harjfk:rwp04-047

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March. [Downloadable!] (restricted)
  2. Rodriguez-Clare, Andres, 2007. "Clusters and comparative advantage: Implications for industrial policy," Journal of Development Economics, Elsevier, vol. 82(1), pages 43-57, January. [Downloadable!] (restricted)
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  3. Charles Sabel & Sanjay Reddy, 2007. "Learning to Learn: Undoing the Gordian Knot of Development Today," Challenge, M.E. Sharpe, Inc., vol. 50(5), pages 73-92, October. [Downloadable!] (restricted)
  4. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February. [Downloadable!] (restricted)
  5. Mihir A. Desai & Devesh Kapur & John McHale, 2004. "Sharing the Spoils: Taxing International Human Capital Flows," International Tax and Public Finance, Springer, vol. 11(5), pages 663-693, 09. [Downloadable!]
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  6. Klinger, Bailey & Lederman, Daniel, 2004. "Discovery and development : an empricial exploration of"new"products," Policy Research Working Paper Series 3450, The World Bank. [Downloadable!]
  7. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development. [Downloadable!]
  8. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March. [Downloadable!]
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  9. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December. [Downloadable!] (restricted)
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  10. Sanjaya LALL, 2004. "Reinventing Industrial Strategy: The Role Of Government Policy In Building Industrial Competitiveness," G-24 Discussion Papers 28, United Nations Conference on Trade and Development. [Downloadable!]
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