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Reinventing Industrial Strategy: The Role Of Government Policy In Building Industrial Competitiveness


  • Sanjaya Lall

    (Green College, Oxford University)


The paper reviews the nature of current globalization and the growing divergence in competitive performance in the developing world. It considers the case for industrial policy, contrasting the neoliberal with the structuralist approach. It argues that there is a valid case for selective interventions in overcoming the market and institutional failures in building the capabilities required for industrial development. It describes the strategies adopted by the Asian Tigers to build industrial competitiveness, and concludes with lessons for other developing countries. The kinds of industrial policy needed in the current setting are different from traditional industrialisation strategies, but globalization and technical change do not eliminate the need for intervention. On the contrary, given path dependence, cumulativeness and agglomeration economies, they increase it. There is a need to reconsider the rules of the game constraining the exercise of industrial policy, and for international assistance in designing and implementing appropriate policies.

Suggested Citation

  • Sanjaya Lall, 2013. "Reinventing Industrial Strategy: The Role Of Government Policy In Building Industrial Competitiveness," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 785-829, November.
  • Handle: RePEc:cuf:journl:y:2013:v:14:i:3:lall

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    References listed on IDEAS

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    Cited by:

    1. Andrés Rodríguez-Clare, 2005. "Microeconomic Interventions after the Washington Consensus," IDB Publications (Working Papers) 1550, Inter-American Development Bank.
    2. King Yoong Lim, 2015. "Industrial Transformation with Heterogeneous FDI and Human Capital," Centre for Growth and Business Cycle Research Discussion Paper Series 213, Economics, The Univeristy of Manchester.
    3. Andrés Rodríguez-Clare, 2005. "Coordination Failures, Clusters, and Microeconomic Interventions," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2005), pages 1-41, March.
    4. Shafaeddin, Mehdi, 2010. "Trade liberalization, industrialization and development; experience of recent decades," MPRA Paper 26355, University Library of Munich, Germany.
    5. Christian Bellak & Rajneesh Narula, 2008. "EU enlargement and consequences for FDI assisted industrial development," Economics & Management Discussion Papers em-dp2008-69, Henley Business School, Reading University.
    6. Mario Cuevas & Sigfrido Lée & Bismarck Pineda, 2010. "Industrial Policy in Guatemala: A Case of Policy Inertia under Changing Paradigms," IDB Publications (Working Papers) 3027, Inter-American Development Bank.
    7. Andrés Rodríguez-Clare, 2005. "Microeconomic Interventions after the Washington Consensus," IDB Publications (Working Papers) 1550, Inter-American Development Bank.
    8. Echavarría Juan José & María Angélica Arbeláez & María Fernanda Rosales, 2006. "La productividad y sus determinantes:el caso de la industria colombiana," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, June.
    9. Shafaeddin, Mehdi, 2010. "The rationale for South-South trade; An Alternative Approach," MPRA Paper 26354, University Library of Munich, Germany.
    10. Uzma Zia, 2007. "International Competitiveness  Where Pakistan Stands?," Development Economics Working Papers 22222, East Asian Bureau of Economic Research.
    11. Andrés Rodríguez-Clare, 2005. "Fallas de coordinación, conglomerados e intervenciones microeconómicas," Research Department Publications 4432, Inter-American Development Bank, Research Department.
    12. Andrés Rodríguez-Clare, 2005. "Intervenciones microeconómicas después del Consenso de Washington," Research Department Publications 4394, Inter-American Development Bank, Research Department.
    13. Mallett, Alexandra, 2007. "Social acceptance of renewable energy innovations: The role of technology cooperation in urban Mexico," Energy Policy, Elsevier, vol. 35(5), pages 2790-2798, May.
    14. Shafaeddin, Mehdi, 2009. "Impact of Selectivity and Neutrality of trade Policy Incentives on Industrialization of Developing Countries; Implications for NAMA Negotiations," MPRA Paper 15037, University Library of Munich, Germany.
    15. Salama, Pierre & Clévenot, Mickaël & Michel, Sandrine, 2010. "Itinéraires et trajectoires de développement en Amérique latine et au-delàEntretien avec Pierre Salama," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 7.
    16. Shafaeddin, Mehdi, 2008. "South-South Regionalism And Trade Cooperation In The Asia-Pacific Region," MPRA Paper 10886, University Library of Munich, Germany.
    17. Ortíz Quevedo, Carlos Humberto & Salazar Juan David, 2014. "Brasil como horizonte: mayor ingreso y mayor crecimiento económico para Colombia," DOCUMENTOS DE TRABAJO-CIDSE 011033, UNIVERSIDAD DEL VALLE - CIDSE.
    18. Khemraj, Tarron & Hinova, Diana, 2011. "Elected Oligarchy and Economic Underdevelopment: The Case of Guyana," MPRA Paper 29733, University Library of Munich, Germany.
    19. Helen Shapiro, 2007. "Industrial Policy and Growth," Working Papers 53, United Nations, Department of Economics and Social Affairs.
    20. Shafaeddin, Mehdi, 2010. "The Role of China in Regional South-South Trade in Asia-Pacific: Prospects for industrialization of the low-income countries," MPRA Paper 26358, University Library of Munich, Germany.
    21. Benhassine, Najy & Raballand, Gaël, 2009. "Beyond ideological cleavages: A unifying framework for industrial policies and other public interventions," Economic Systems, Elsevier, vol. 33(4), pages 293-309, December.
    22. Uzma Zia, 2007. "International Competitiveness—Where Pakistan Stands?," PIDE-Working Papers 2007:28, Pakistan Institute of Development Economics.
    23. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government.
    24. repec:rnp:wpaper:2861 is not listed on IDEAS
    25. Mo, Pak Hung, 2011. "Trade Liberalization Sequence for Sustained Economic Growth," MPRA Paper 28917, University Library of Munich, Germany.

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