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Industrial Policy and Downstream Export Performance

Bruce Blonigen

No 18694, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Industrial policies (IPs) include such varying practices as production subsidies, export subsidies, and import protection, and are commonly used by countries to promote targeted sectors. However, such policies can have significant impacts on sectors other than those targeted by the IPs, particularly when the target sector produces goods that are key inputs to downstream sectors. Surprisingly, there has been little systematic analysis of how IPs in targeted sectors affect other sectors of the economy. Using a new hand-collected database of steel-sector IP use in major steel-producing countries from 1975 through 2000, this paper examines whether steel-sector IPs have a significant impact on the export competitiveness of the country's other manufacturing sectors, particularly those that are significant downstream users of steel. I find that a one-standard-deviation increase in IP presence leads to a 3.6% decline in export competitiveness for an average downstream manufacturing sector. But this effect can be as high as 50% decline for sectors that use steel as an input most intensively. These general negative effects of IPs are primarily due to export subsidies and non-tariff barriers, particularly in less-developed countries.

JEL-codes: F13 F14 H25 H81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2013-01
Note: DEV ITI
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Published as Bruce A. Blonigen, 2015. "Industrial Policy and Downstream Export Performance," The Economic Journal, , pages n/a-n/a.

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