On the importance of openness for industrial policy design in developing countries

Kjetil Bjorvatn () and Nicola Coniglio
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Kjetil Bjorvatn: Norwegian School of Economics and Business Administration

No 14, SERIES from Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro"

Abstract: 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 growth; openess (search for similar items in EconPapers)
JEL-codes: F15 O14 O20 (search for similar items in EconPapers)
Pages: 769
Date: 2007-02, Revised 2007-02
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