13 January 2010

Industrial Policy and Comparative Advantage

Justin Lin of the World Bank and Ha-Joon Chang of Cambridge University debate whether industrial policy in developing countries should follow the principle of comparative advantage or defy it.
The debate is the first in a series in Development Policy Review


...focuses on the question of whether policies to encourage industrialisation and industrial upgrading should conform to current comparative advantage or aim to miss out steps on the ladder: textiles first or mobile phones? The first position might be thought to be associated with neo-liberal theory which eschews intervention, the second with more structuralist policies which favour government support and extended infant-industry protection. The debate is more subtle than that, however. Both protagonists favour government intervention, but in different ways and for different purposes.

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