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Industrial Policy and Competition

  • Philippe Aghion
  • Mathias Dewatripont
  • Luosha Du
  • Ann Harrison
  • Patrick Legros

Using a comprehensive dataset of all medium and large enterprises in China between 1998 and 2007, we show that industrial policies allocated to competitive sectors or that foster competition in a sector increase productivity growth. We measure competition using the Lerner Index and include as industrial policies subsidies, tax holidays, loans, and tariffs. Measures to foster competition include policies that are more dispersed across firms in a sector or measures that encourage younger and more productive enterprises.

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File URL: http://www.nber.org/papers/w18048.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18048.

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Date of creation: May 2012
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Publication status: published as Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2015. "Industrial Policy and Competition," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 1-32, October.
Handle: RePEc:nbr:nberwo:18048
Note: EFG IO
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  1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
  2. Luosha Du & Ann Harrison & Gary Jefferson, 2011. "FDI Spillovers and Industrial Policy: The Role of Tariffs and Tax Holidays," NBER Working Papers 16767, National Bureau of Economic Research, Inc.
  3. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
  4. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  5. Nina Pavcnik, 2000. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," NBER Working Papers 7852, National Bureau of Economic Research, Inc.
  6. Bruce Greenwald & Joseph E. Stiglitz, 2006. "Helping Infant Economies Grow: Foundations of Trade Policies for Developing Countries," American Economic Review, American Economic Association, vol. 96(2), pages 141-146, May.
  7. Ann E. Harrison & Leslie A. Martin & Shanthi Nataraj, 2011. "Learning Versus Stealing: How Important are Market-Share Reallocations to India's Productivity Growth?," NBER Working Papers 16733, National Bureau of Economic Research, Inc.
  8. Harrison, Ann E, 1994. "An Empirical Test of the Infant Industry Argument: Comment," American Economic Review, American Economic Association, vol. 84(4), pages 1090-95, September.
  9. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  10. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  11. Sivadasan Jagadeesh, 2009. "Barriers to Competition and Productivity: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-66, September.
  12. Ann Harrison & Andrés Rodríguez-Clare, 2009. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," NBER Working Papers 15261, National Bureau of Economic Research, Inc.
  13. Krueger, Anne O & Tuncer, Baran, 1982. "An Empirical Test of the Infant Industry Argument," American Economic Review, American Economic Association, vol. 72(5), pages 1142-52, December.
  14. Du, Luosha & Harrison, Ann & Jefferson, Gary H., 2012. "Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007," Journal of Asian Economics, Elsevier, vol. 23(3), pages 234-243.
  15. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
  16. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
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