Chapter

The East Asian Industrial Policy Experience: Implications for the Middle East

Ahmed Galal

in Industrial Policy in the Middle East and North Africa

Published by American University in Cairo Press

Published in print April 2008 | ISBN: 9789774160509
Published online September 2011 | e-ISBN: 9781617970290 | DOI: http://dx.doi.org/10.5743/cairo/9789774160509.003.0005
The East Asian Industrial Policy Experience: Implications for the Middle East

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The earliest analytical justifications for industrial promotion policies took the form of “infant industry” or dynamic comparative advantage arguments. Many elaborations on this argument have been developed and among the most salient are those that relate to uncertainty and the informational requirements needed to implement a welfare-enhancing policy. Policy may actually reduce welfare relative to the market equilibrium if it shifts resources toward one sector of dynamic comparative advantage and away from another where the learning is even larger. An industrial policy through which the government acts as the precommitment mechanism was one way of solving this coordination failure. These arguments were developed in the context of what were implicitly closed economy models—that there was no possibility of simply importing the needed input or achieving scale economies by exporting.

Keywords: infant industry; uncertainty; market equilibrium; scale economies; importing

Chapter.  10118 words.  Illustrated.

Subjects: International Relations

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