The Textbook Case for Industrial Policy: Theory Meets Data

Dominick Bartelme, Arnaud Costinot, Dave Donaldson and Andres Rodriguez-Clare
Additional contact information
Dominick Bartelme: University of Michigan
Dave Donaldson: MIT

No 675, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: The textbook case for industrial policy is well understood. If some sectors are subject to external economies of scale, whereas others are not, a government should subsidize the first group of sectors at the expense of the second. The empirical relevance of this argument, however, remains unclear. In this paper we develop a strategy to estimate sector-level economies of scale and evaluate the gains from such policy interventions in an open economy. Our benchmark results point towards significant and heterogeneous economies of scale across manufacturing sectors, but only modest gains from industrial policy, below 1% of GDP on average. Though these gains can be larger in some of the alternative environments that we consider, they are always smaller than the gains from optimal trade policy.

Keywords: Industrial; Policy (search for similar items in EconPapers)
JEL-codes: F1 F10 F11 F12 F13 F14 F17 (search for similar items in EconPapers)
Pages: 68 pages
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (13)

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http://www.fordschool.umich.edu/rsie/workingpapers/Papers651-675/r675.pdf

Related works:
Working Paper: The Textbook Case for Industrial Policy: Theory Meets Data (2019)
Working Paper: The Textbook Case for Industrial Policy: Theory Meets Data (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:675

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