Industrial Policy, Collective Action, and the Direction of Technological Change
Posted: 13 Jan 1999
In this study we assume that government is distorted as it is open to the influence of producers' collective action. Remaining within the confines of industrial policy debates, the study draws attention to the role that institutional arrangements and asymmetries in sectoral technology absorption play in affecting the path of technological change. Simulation results are threefold. First, biased institutions under the distorted government might, indeed, help drag the economy towards the right direction. In this process, current generations would experience welfare loss, while a technologically advantageous environment is prepared for future generations. Secondly, the undistorted government supports the path of capital-augmenting technological change, and this path is also supported by the distorted government only if institutions deliberately favor the investment goods producing sector. Thirdly, sectoral asymmetries in technology assimilation do not help industries overcome disadvantageous situations in the political market, and hence do not influence the direction of technological developments.
JEL Classification: O33, O38, P26
Suggested Citation: Suggested Citation