Industrial policy and complexity economics

Josef T. Yap and John Faust M. Turla
Additional contact information
Josef T. Yap: Ateneo de Manila University
John Faust M. Turla: University of the Philippines

Philippine Review of Economics, 2024, vol. 61, issue 2, 24-52

Abstract: Mainstream theory underlying industrial policy highlights the neoclassical and structuralist approaches. The discussion on structuralist theories readily segues to complexity economics where industrial policy foments structural transformation by creating reinforcing feedback loops, particularly among manufacturing, exports, and investment. Empirical evidence is provided by applying panel cointegration analysis to investigate coevolution patterns among the following variables: investment-GDP ratio, exports-GDP ratio and manufacturing-GDP ratio. Econometric estimates show that there is indeed a long-run relationship that is bidirectional among the three variables. However, this is only a necessary condition for reinforcing feedback loops to materialize. Idiosyncratic factors in each country determine whether industrial policy has led to growth-oriented feedback loops. In the Philippines, despite interventions to boost manufacturing, no growth-oriented loop was established because of inadequate investment, particularly in infrastructure. Moreover, exports were hampered by the poor record in latching on to regional production networks. The Republic of Korea has had more success than Malaysia because it strengthened its innovation system. The missing link in Malaysia is own-technology creation.

Keywords: industrial policy; complexity economics; coevolution; feedback loops (search for similar items in EconPapers)
JEL-codes: L52 L53 O14 O25 O53 O57 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://pre.econ.upd.edu.ph/index.php/pre/article/view/1055/997 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:phs:prejrn:v:61:y:2024:i:2:p:24-52

Access Statistics for this article

More articles in Philippine Review of Economics from University of the Philippines School of Economics and Philippine Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by HR Rabe ().