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Back in Business: Industrial Policy for Emerging Economies in the New Globalization

Author

Listed:
  • Berglof, Erik

    () (London School of Economics)

  • Cable , Vince

    () (London School of Economics)

Abstract

We explore the potential roles of industrial policy in the transition from middle-income to high-income status, and the actual experience of industrial policy in emerging economies. Guided by the conceptual framework of the neo-Schumpeterian approach, we look at industrial policy in the context of structural transformation, i.e., in transforming economic structures as well as the institutions supporting these structures. Today’s emerging economies face a dual structural transformation challenge: (i) to move closer to the current world technology frontier (traditional catch-up), and (ii) to adjust to technological change in advanced economies and increasingly binding environmental and social constraints. The feasible set of industrial policy is constrained by state capacity. The paradox of industrial policy is that it is most straightforward when state capacity is the most constrained. We suggest that emerging economies still should explore what we denote as sector-based horizontal policies addressing market and state failures in individual industries.

Suggested Citation

  • Berglof, Erik & Cable , Vince, 2018. "Back in Business: Industrial Policy for Emerging Economies in the New Globalization," ADB Economics Working Paper Series 537, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0537
    as

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    References listed on IDEAS

    as
    1. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624, December.
    2. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1351-1408.
    3. Erik Berglof, 2016. "European Industrial Policy — Tapping the Full Growth Potential of the EU," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 51(6), pages 335-340, November.
    4. Caroline Freund & Sarah Oliver, 2016. "Rich People Poor Countries: The Rise of Emerging-Market Tycoons and their Mega Firms," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 7038, February.
    5. Aghion, Philippe & Bircan, Cagatay, 2017. "The Middle-Income Trap from a Schumpeterian Perspective," ADB Economics Working Paper Series 521, Asian Development Bank.
    6. Hamilton, Bob & Mohammad, Sharif & Whalley, John, 1984. "Rent seeking and the North-South terms of trade," Journal of Policy Modeling, Elsevier, vol. 6(4), pages 485-511, November.
    7. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    8. Chang, Ha-Joon, 1993. "The Political Economy of Industrial Policy in Korea," Cambridge Journal of Economics, Oxford University Press, vol. 17(2), pages 131-157, June.
    9. Berglöf, Erik, 2016. "European industrial policy — tapping the full growth potential of the EU," LSE Research Online Documents on Economics 68895, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    emerging economies; industrial policy; innovation; state capacity; structural transformation;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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