Manufacturing Fetishism: The Neo-Mercantilist Preoccupation with Protecting Manufacturing

30 Pages Posted: 2 Sep 2016  

Alecia Waite Cassidy

University of Michigan at Ann Arbor

Edward Tower

Duke University - Department of Economics; Chulalongkorn University-Economics Department

Xiaolu (Lucy) Wang

Cornell University - Department of Economics

Date Written: September 1, 2016

Abstract

Two common views are that a country cannot develop without a strong manufacturing base and that trade restrictions are essential to facilitate the development of that strong manufacturing base and thus spur economic growth. We ask:

• Does a strong manufacturing share of GDP facilitate economic growth?
• Do trade restrictions ensure the development of a strong manufacturing base?
• How can governance affect manufacturing share?
• And are the relationships we find robust across regions?

We find the manufacturing share is not significantly correlated with a higher standard of living. Nor is it related significantly and consistently to economic growth. We also find that trade restrictions both at home and abroad shrink the manufacturing base and smother economic growth. A better way than protectionism and subsidies specific to industry to enhance economic growth is to improve governance effectiveness and the quality of regulation.

Keywords: Manufacturing Share, Economic Growth, Trade Restrictions

Suggested Citation

Waite Cassidy, Alecia and Tower, Edward and Wang, Xiaolu (Lucy), Manufacturing Fetishism: The Neo-Mercantilist Preoccupation with Protecting Manufacturing (September 1, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 227. Available at SSRN: https://ssrn.com/abstract=2833529

Alecia Waite Cassidy

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Edward Tower (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1818 (Phone)
919-684-8974 (Fax)

Chulalongkorn University-Economics Department

Bangkok
Thailand

Xiaolu Wang

Cornell University - Department of Economics ( email )

Ithaca, NY
United States

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