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Appropriate Economic Policies at Different Stages of Development

  • Polterovich, Victor
  • Popov, Vladimir

This paper summarizes theoretical arguments and provides empirical evidence to support the statement that rational economic policies depend qualitatively on two factors – technological and institutional level of development of a country. We concentrate on the impact of three policies to promote the catch up development – import tariffs, increase of government revenues/spending, and the speed of foreign exchange reserves accumulation ("exchange rate protectionism"). It is shown that the impact of these policies may be positive or negative dependening on a stage of development; in each case we find threshold levels or critical combinations of GDP per capita and/or an institutional quality indicator. A theoretical model demonstrates how tariff protection and accumulation of reserves can boost long term growth in the presence of externalities.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20066.

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Date of creation: 2005
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Handle: RePEc:pra:mprapa:20066
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  1. Polterovich, Victor, 2007. "Institutional Trap," MPRA Paper 20595, University Library of Munich, Germany.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. Jeffrey G. Williamson, 2002. "Winners and Losers Over Two Centuries of Globalization," NBER Working Papers 9161, National Bureau of Economic Research, Inc.
  4. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  5. Vladimir Popov, 2000. "Shock Therapy Versus Gradualism: The End Of The Debate (Explaining The Magnitude Of Transformational Recession)," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 1-57, April.
  6. Douglas A. Irwin, 2002. "Did Import Substitution Promote Growth in the Late Nineteenth Century?," NBER Working Papers 8751, National Bureau of Economic Research, Inc.
  7. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
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