Can Industrial Policy Be Good Policy?

THE principal rationale for public policy intervention lies in the inadequacies of market outcomes. Yet this rationale is really only a necessary, not a sufficient, condition for policy formulation.1 Policy formulation properly requires that the realized inadequacies of market outcomes be compared with the potential inadequacies of nonmarket efforts to ameliorate them. The "anatomy" of market failure provides only limited help in prescribing therapies for government success.2 That markets may fail to produce either economically optimal or socially desirable outcomes has been elaborated in a well-known and voluminous

The Evolution of Property Rights: A Study of the American West

The paper argues that an economy's industry/technology structure is endogenously determined by the economy's endowment structure. For the convergence to occur, the government of an LDC should target the upgrading of endowment structure instead of the industry/technology structure in its development strategy. If the government chooses to pursue an industry/technology structure, which is inconsistent with the comparative advantage determined by the economy's endowment structure, the firms in the government's priority sectors will be nonviable and the government needs to suppress the function of market and distort all kinds of prices as a way to protect the nonviable firms. Convergence will fail to occur as a result. Regression results from cross-country panel data are consistent with the predictions of the above arguments.

The East Asian model of economic development focuses on 5 shared characteristics that seem significant in the contemporary economic development of Japan Taiwan and Korea. They are economic characteristics and include 1) high investment ratios 2) small public sectors 3) competitive labor markets 4) export expansion and 5) government intervention in the economy. Large and efficient investments in human capital and well-developed capacities to absorb new technology are 2 other economic features shared by The Three. One could add overcrowding (high man/land ratios) and scarcity of natural resources though these are handicaps rather than sources of economic strength. It is possible however that virtue springs from necessity and that ample arable land or abundant natural resources mainly permit governments to postpone the difficult decisions needed to promote development rather than provide the wherewithal needed to finance development. Other noneconomic characteristics of The Three such as ethnic and linguistic homogeneity relatively compact geography manageable population size and the Confucian tradition have not been considered in the model even though they have undoubtedly influenced labor productivity savings behavior and other aspects of economic performance. Whether the East Asian model ought to be followed depends on whether current and foreseeable circumstances are sufficiently like those faced by The Three to justify using the same policies that they used. Applicability of the East Asian model should also depend on whether the strategy employed by The Three has been responsible for their economic success. 2 aspects of the East Asian models policy features are noteworthy: 1) the policies typically work by influencing rather than replacing private market decisions and 2) the public expects government to intervene to influence economic growth.

The current global economic crisis has been disastrous for many millions of people. But it has also had the desirable effect of prompting a little more skepticism towards the economic beliefs that have constituted the mainstream view about public economic strategy for the past three decades, both in the major western states and in international lending organizations like the World Bank and the IMF. They have at their core the proposition that ‘government failure is generally worse than market failure’, which supports the default policy setting of ‘more free market’ in most countries most of the time. The new crisis‐induced skepticism is good news because the previous confidence rested more on what J. S. Mill called ‘the deep slumber of a settled opinion’ than on a solid empirical base. The present article begins by summarizing some powerful pieces of evidence that challenge core mainstream propositions in the context of developing countries, which have received less attention than they deserve. Having shown why the mainstream prescription for the role of government in development is questionable, the article describes some key points about the nature of industrial policy in East Asia and about the general rationale for a certain kind of industrial policy even where state capacity is relatively weak. The rationale is all the stronger in the world economy after the crisis, when a major surge of innovation around energy, water, nanotechnology and genetics is likely, rendering many existing specializations unviable. The article then presents an argument about the institutional arrangements of a ‘developmental state’ through which national strategies can be formed and implemented. It ends by describing small signs of new flexibility in World Bank and IMF thinking.Policy Implications Liberalizing markets, attracting FDI and promoting good governance are not necessary conditions of long‐term economic growth and development in low‐income countries. In the wake of the global financial crisis and the impending surge of new technologies, the role of industrial policy – promoting some sectors or products ahead of others – should be expanded. Import replacement as well as export orientation are crucial components of a successful industrial policy. Four organizational features are important in a developmental state: (1) an even balance between the state and business groups; (2) a public service mindset among state officials; (3) delivery of patronage resources separately from the economic bureaucracy; and (4) an industrial extension service, with tight limits on its officials’ discretionary control of resources. Developing country governments and firms should be prepared to push back against the shrinking latitude for industrial policy instruments allowed in international trade and investment agreements.

PurposeThis study investigates whether and how place-based industrial relocation policy affects firm innovation.Design/methodology/approachBy exploiting the establishment of China's National Industrial Relocation Demonstration Zones (NIRDZs) as a quasi-natural experiment in a difference-in-differences design, the authors examine the externalities of industrial policies that support sustainable development and growth from the perspectives of firms' patenting activities.FindingsThe study consistently finds that the NIRDZs policy significantly boosts local firm innovation, translating into a 60.46% increase in the patent applications of treated firms. The estimation results remain robust to a series of alternative specifications. Moreover, heterogeneity analysis suggests that the firms that benefited most were state-owned enterprises, firms with higher productivity, or firms in non-high-tech industries. Further, the authors find that the NIRDZs policy stimulates firm innovation mainly in the form of utility model patents, followed by designs and invention patents.Research limitations/implicationsThe results provide suggestions and implications for policymakers to improve the efficiency of state-led industrial policies and avoid “government failure” in policy implementation.Social implicationsThis study provides suggestions and implications for policymakers to improve the efficiency of state-led industrial policies and avoid “government failure” in the policy implementation.Originality/valueThis study fills the research gap by exploiting quasi-experiments to assess the effectiveness of state-led industrial policies for emerging economies. (2) The analysis sheds empirical light on how corporate innovation is motivated and financed by selective and functional industrial policies. (3) Theoretically, the results rationalize why state-led industrial relocation fuel innovation capabilities of localities from Marshall externalities and competition crowding-out effects.

Strategies, Struggles, and Sites of Transformation in Korean Political Economy

The protection of author's rights in Mexico has historical references to the Colonial Period, because the Spanish legal system established our legal foundations. Protection was granted during the author's life plus thirty years after his death, at which time his successors became entitled to royalties. Protection under Mexican law is obtained merely from the creation of the intellectual work itself, and no further step or formality is necessary. For some commentators, the publication of the said Decree meant the recognition that author's rights protection extended to computer software. In 1846, a Decree on Literary Property was enacted, treating author's rights as property rights, but limiting them in time to the author's life plus thirty years. The rights inherent in the person cannot be the subject of property rights because they have no value or economic importance, being non-commercial, not unlike the right of individual freedom, the right to life, and freedom of thought and expression.

Dealing with design piracy is a blind spot in German business history, but studies on the importance of industrial property rights as an element of business strategies are also scarce in general. This article uses the example of the «Barmer Artikel», a specific segment of Wuppertal’s textile industry, during the period from the 1920s to the 1960s to examine how market strategies as well as legal disputes, conflict behaviour and juridical solutions were mutually dependent with regard to design protection. It shows that the enforcement of intellectual property rights was primarily a question of opportunity costs and that both plaintiffs and defendants carefully considered their actions, e.g. whether they appealed to the local arbitration court, took ordinary legal action or whether they avoided proceedings altogether. The findings reveal that property rights regimes are contingent and are equally determined by legal and economic considerations. As a result, the theoretical enforceability of property rights was factually more important than their practical enforcement.

Property rights determine the incentives for resource use. Property rights consist of the set of formal and informal rights to use and transfer resources. Property rights range from open access to a fully specified set of private rights. By open access we mean that anyone can use the asset regardless o fh ow their use affects the use of others. A full set of private rights consists of the following: 1) the right to use the asset in any manner that the user wishes, generall yw ith the caveat that such use does not interfere with someone else’s property right; 2) the right to exclude others from the use of the same asset; 3) the right to derive income from the asset; 4) the right to sell the asset; and 5) the right to bequeath the asset to someone of your choice. In between open access and private property rights are a host of commons arrangements. Commons arrangements differ from open access in several respects. Under a commons arrangement onl yas e lect group is allowed access to the asset and the use rights of individuals using the asset may be circumscribed. For example, a societal group, e.g., a village, trib eo rhomeowner’s association, may allow its members to place cattle i na common pasture but limit the number of cattle that any member may put on the commons. One rol eo f the state i st odefine, interpret and enforce property rights. Definintion of property rights is a legislative function of the state. Interpretation of property rights i sa judicia lf unction of the state. Enforcement of property rights i sap o lice function of the state. All three functions entail costs an df or this reason some rights may be left by the state as open access. Moreover, many assets have multiple dimensions an di t is costly for the state to define property rights over all valuable dimensions and costly for the state to enforce property rights over all dimensions. As such, some attributes may be either de jure or de facto left as open access. Individual sa nd groups have incentives to expropriate the use rights over attributes that the state leaves as open access. In many situations individuals or groups use violence as a strategy to capture property rights. From the vantage point of societies, violence is wasteful and can be a motivating force for the state to enforce property rights. Violence or threats of violence may also resul tw hen the state attempts to redistribute property rights.

In the decades after Namibia’s independence in 1990, the Namibian state’s approach to economic development focused on macroeconomic stability and incentives to encourage foreign investment. Rhetoric around developmental states and industrial policy was nowhere to be found. But over the last decade—starting in earnest around 2012—the Government has begun speaking seriously about “developmentalism” and the need for the state to play a more proactive role in the economy to drive structural transformation. Policy has been shifted, including via some landmark industrial strategies and trade policy efforts to protect Namibia’s infant industries. Nevertheless, a Namibian development state remains an ambition rather than a reality, with the country’s industrial policy efforts having encountered a number of serious obstacles. This chapter—by looking at the balance of power in Namibia’s society and the country’s interactions with global forces and actors—seeks to understand the underlying factors behind the failures of Namibia’s industrial policy drive. Describing Namibia’s “system of accumulation”, characterised by the interests of powerful sections of society, the chapter helps to understand issues around latent developmentalism within the global periphery.

This paper explores the relationship between trade and the regulation of what are otherwise open-access resources when enforcement of property rights is costly. When enforcement costs are significant, environmental property rights are only adopted and enforced when the potential resource rents exceed the regulatory cost. Since trade affects the magnitude of these rents, trade can affect the willingness to regulate. One of the most striking consequences of the presence of an enforcement cost is that the decision to liberalize trade, even at autarkic prices, can result in a switch in the regulatory regime and potentially reduce economic welfare.

This paper is to trace the historical origin of the idea that the state (government) can and should adopt a series of industrial policies as well as protective measures to nurture domestic infant industries in order to show how this economic theory sheds new insights into previous debates over the role of East Asian developmental states. Many scholars on the East Asian development experiences have correctly pointed out developmental states’ industrial and trade policies for promoting outward export-led growth. However, least attention was paid to the (historical origin of the) economic theory that justifies this highly unorthodox market intervention by the state. The author claims that the original idea from the history of economic thought is best exemplified by the early 19th century German political economist Friedrich List, and examines how his policy proposals for the infant industry protection have been used by almost all advanced economies since then. This historical investigation of economic thought and actual capitalist economic development process can offer a new angle through which we can critically evaluate some of previous debates over the validity and replicability of the state industrial policies for developing countries nowadays. JEL: B3, B15, O24, O25, O53 Keyword: Friedrich List, infant industry protection, comparative advantage, East Asian development model, developmental state, industrial policy

The origin of today’s global environmental problems is the historic difference in property rights regimes between industrial and developing countries, the North and the South. In industrial countries resources such as forests and oil deposits are often under well defined and enforceable property rights, mostly private property regimes. In developing countries they are generally under ill-defined and weakly enforced property rights, mostly community or state property regimes but de-facto open-access regimes. Ill-defined and weakly enforced property rights lead to the over-extraction of natural resources in the South. They are exported at low prices to the North that over-consumes them. The international market amplifies the tragedy of the commons, leading to inferior solutions for the world economy. In developing countries, the conversion of natural resources regimes from community or state property regimes or common access to private property regimes faces formidable opposition due to international economic interests, or to heavy dependence of local and poor people on these resources. The weakness of property rights in inputs to production, such as timber and oil, could be compensated by assigning well defined and enforceable property rights to products or outputs. The 1997 Kyoto Protocol provides an example as it limits countries’ rights to emit carbon, a by - product of burning fossil fuels, but the atmosphere’s carbon concentration is a public good, which makes trading tricky. Similarly, trading rights to forests’ carbon sequestration services involve public goods. Markets that trade public goods require a measure of equity to ensure efficiency, a requirement different than the markets for private goods

Homesteading and Property Rights; Or, "How the West Was Really Won"