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Clusters and Comparative Advantage: Implications for Industrial Policy

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Author Info
Andrés Rodríguez-Clare

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Abstract

Industrial 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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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 4391.

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Date of creation: Dec 2005
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Handle: RePEc:idb:wpaper:4391

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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. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April. [Downloadable!] (restricted)
  2. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April. [Downloadable!] (restricted)
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  3. Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861 Elsevier. [Downloadable!] (restricted)
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  4. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April. [Downloadable!] (restricted)
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  1. Marcelo de Paiva Abreu, 2005. "Which "industrial policies" are meaningful for Latin America?," Textos para discussão 493, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  2. Hoekman. Bernard & Prowse, Susan, 2005. "Economic policy responses to preference erosion : from trade as aid toaid for trade," Policy Research Working Paper Series 3721, The World Bank. [Downloadable!]
  3. William Maloney & Andrés Rodríguez-Clare, 2005. "Insuficiencias de innovación," RES Working Papers 4430, Inter-American Development Bank, Research Department. [Downloadable!]
  4. Pack, Howard & Saggi, Kamal, 2006. "The case for industrial policy : a critical survey," Policy Research Working Paper Series 3839, The World Bank. [Downloadable!]
  5. Glavan, Bogdan, 2007. "Coordination Failures, Poverty Traps, "Big Push" Policy and Entrepreneurship: A Critical View," MPRA Paper 5757, University Library of Munich, Germany. [Downloadable!]
  6. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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  7. William Maloney & Andrés Rodríguez-Clare, 2005. "Innovation Shortfalls," RES Working Papers 4429, Inter-American Development Bank, Research Department. [Downloadable!]
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