ECON1001 Lecture Notes - Lecture 8: Industrial Policy, World Trade Organization, Comparative Advantage
Document Summary
Trade and development: according to justin lin"s new structural economics, the key driver of development is steady ascension up the value chain. Import substitution and heavy-handed industrial policy was consequently the norm (e. g. korea) Industrial policy: anything that gives a boost to a particular industry, subsidies, tariff barriers to competition, purpose-built infrastructure, tax holidays. A key objective is to rescue failing units. Similar for developing backward areas they are backward because they are unsuitable for industry. Similar again for generating employment free markets do that. Why is industrial policy bad: subsidies and tariffs are distortionary, government is bad at picking winners . Slices of their production to countries with appropriate labour at lowest cost. This reduces their total cost: for example . Implications for korean approach: wto makes specialising and trading much more feasible than before because export markets exist, gpns make it prohibitively expensive to try to build an entire value chain domestically, e. g.