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On the importance of openness for industrial policy design in developing countries

Bjorvatn, Kjetil; Coniglio, Nicola D.
Working paper
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URI
http://hdl.handle.net/11250/163050
Date
2007-01
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  • Discussion papers (SAM) [676]
Abstract
How should industrial policy be designed in developing countries?

Should industrial policy be targeted to a few sectors or be more broad

based and therefore more neutral? Our theoretical analysis demonstrates

that access to foreign markets is key to answering this question.

We show that in a less open economy, industrial policy should be targeted,

while in a more open economy, broad based policies are likely

to be more effective. One implication of this results is that deregulation

is likely to be more successful in a relatively open economy than

in a more closed economy. Indeed, deregulation with limited foreign

market access may lead to deindustrialization. We provide empirical results that support these predictions.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2007:3

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