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

摘要

How should industrial policy be designed in developing countries?Should industrial policy be targeted to a few sectors or be more broadbased and therefore more neutral? Our theoretical analysis demonstratesthat 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 likelyto be more effective. One implication of this results is that deregulationis likely to be more successful in a relatively open economy thanin a more closed economy. Indeed, deregulation with limited foreignmarket access may lead to deindustrialization. We provide empirical results that support these predictions.