Clusters and Comparative Advantage: Implications for Industrial Policy
AbstractIndustrial agglomerations or `clusters` arise in the presence of industry-specific and local externalities, also called Marshallian externalities. The standard argument is that such externalities may justify a policy of infant-industry protection to allow and encourage clusters to emerge. This paper explores that argument and shows that different policy implications emerge under a more realistic modeling of clusters. In particular, rather than distorting prices to promote clusters in `advanced`sectors that may exhibit strong clustering possibilities, countries should focus instead on promoting clustering in current sectors that have demonstrated the strongest comparative advantage. Import substitution is not a proper way to achieve such a goal.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4391.
Date of creation: Dec 2005
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- Rodriguez-Clare, Andres, 2007. "Clusters and comparative advantage: Implications for industrial policy," Journal of Development Economics, Elsevier, vol. 82(1), pages 43-57, January.
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