On the Importance of Openness for Industrial Policy Design in Developing Countries

27 Pages Posted: 6 Feb 2010

See all articles by Kjetil Bjorvatn

Kjetil Bjorvatn

Norwegian School of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Nicola D. Coniglio

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods

Date Written: January 23, 2007

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.

Keywords: Industrialization, policy design, policy reform, economic

JEL Classification: F15, O14, O2

Suggested Citation

Bjorvatn, Kjetil and Coniglio, Nicola D., On the Importance of Openness for Industrial Policy Design in Developing Countries (January 23, 2007). NHH Dept. of Economics Discussion Paper No. 3/2007, Available at SSRN: https://ssrn.com/abstract=1547811 or http://dx.doi.org/10.2139/ssrn.1547811

Kjetil Bjorvatn (Contact Author)

Norwegian School of Economics and Business Administration ( email )

Helleveien 30
N-5035 Bergen
Norway
47-55 9595 85 (Phone)
47-55 9595 43 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Nicola D. Coniglio

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods ( email )

Largo Abbey St. Scholastica
Bari, 70124
Italy

HOME PAGE: http://www.dse.uniba.it/Corsi/docenti/Coniglio/Nicola_paginaWeb.htm

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