| Item Type |
Journal paper
|
| Abstract |
We study industrial policy and its effectiveness in a model with both market and government failures. We introduce a public agency responsible for industrial policy into the model of Hausmann and Rodrik [Hausmann, R., Rodrik, D., 2003. Development as Self-Discovery. Journal of Development Economics 72, 603-633], and we assume that this agency has limited information and political motives. In an extension, we further allow entrepreneurs to engage in rent seeking activities. We find that industrial policies are ineffective if the public agency is poorly informed, but not necessarily so if it is highly politically motivated. Given a politically motivated public agency, industrial policies are effective if and only if the institutional setting ensures that such policies are modest, e.g. by restricting the agency's budget. Moreover, our model helps us to understand why the same industrial policies that have failed elsewhere have been relatively successful in South Korea and Taiwan. |
| Authors |
Hodler, Roland |
| Journal or Publication Title |
Journal of Development Economics |
| Language |
English |
| Keywords |
Industrial policy, Market failures; Government failures; Rent seeking; Political economics |
| Subjects |
economics |
| HSG Classification |
contribution to scientific community |
| Refereed |
Yes |
| Date |
1 September 2009 |
| Publisher |
Elsevier |
| Place of Publication |
Amsterdam |
| Volume |
90 |
| Number |
1 |
| Page Range |
85-93 |
| Number of Pages |
9 |
| ISSN |
0304-3878 |
| ISSN-Digital |
1872-6089 |
| Publisher DOI |
https://doi.org/10.1016/j.jdeveco.2009.01.009 |
| Depositing User |
Prof. Dr. Roland Hodler
|
| Date Deposited |
23 Sep 2014 20:15 |
| Last Modified |
28 Mar 2023 00:23 |
| URI: |
https://www.alexandria.unisg.ch/publications/234960 |
Industrial Policy in an Imperfect World
