Government (Industrial) Policies for Competitiveness in a Global Economy
The general principle is that it is crucial for the government to provide a stable macroeconomic environment conducive to business development with a clear, transparent and neutral regulatory environment and neutral incentives to all firms and indu...
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International Finance Corporation, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/160861484054779188/Government-industrial-policies-for-competitiveness-in-a-global-economy http://hdl.handle.net/10986/25929 |
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okr-10986-259292021-04-23T14:04:32Z Government (Industrial) Policies for Competitiveness in a Global Economy Tarr, David industrial policy competitiveness globalization The general principle is that it is crucial for the government to provide a stable macroeconomic environment conducive to business development with a clear, transparent and neutral regulatory environment and neutral incentives to all firms and industries. Clear, transparent and neutral incentives (those which do not distinguish by sector or firm) are crucial so that entrepreneurial innovation is rewarded more highly than rent-seeking activities. The economy must provide its most talented members with the incentive to engage in entrepreneurial activities such as starting or expanding firms, developing new products and lowering costs. If the economy provides extensive subsidies or tax exemptions to industries or firms, or presents a difficult regulatory framework within which to do business, corruption will be encouraged and, crucially, talented people will find it more profitable to engage in the socially wasteful activity of lobbying the government for subsidies, protection, tax or regulatory relief. This socially wasteful lobbying is especially harmful because it attracts scarce entrepreneurial talent that would otherwise be devoted to helping the economy grow. First, there is the risk that the wrong industries will be identified. The market is a more reliable indicator of the industries that have comparative advantage than any economic model or theory. Over time this is particularly true, as comparative advantage changes with technological development. Moreover, targeting industries as "winners" will generate rent-seeking where industries will spend resources to obtain government subsidies rather than attempting to compete more effectively on the market. Governments often find it difficult to resist these pressures. And assistance that is designed to be temporary may become permanent. Thus, experience in most countries has shown that a government policy of attempting to "pick winners" is highly counter productive. 2017-01-25T20:22:12Z 2017-01-25T20:22:12Z 2005 Working Paper http://documents.worldbank.org/curated/en/160861484054779188/Government-industrial-policies-for-competitiveness-in-a-global-economy http://hdl.handle.net/10986/25929 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank International Finance Corporation, Washington, DC Publications & Research Publications & Research :: Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
industrial policy competitiveness globalization |
| spellingShingle |
industrial policy competitiveness globalization Tarr, David Government (Industrial) Policies for Competitiveness in a Global Economy |
| description |
The general principle is that it is
crucial for the government to provide a stable macroeconomic
environment conducive to business development with a clear,
transparent and neutral regulatory environment and neutral
incentives to all firms and industries. Clear, transparent
and neutral incentives (those which do not distinguish by
sector or firm) are crucial so that entrepreneurial
innovation is rewarded more highly than rent-seeking
activities. The economy must provide its most talented
members with the incentive to engage in entrepreneurial
activities such as starting or expanding firms, developing
new products and lowering costs. If the economy provides
extensive subsidies or tax exemptions to industries or
firms, or presents a difficult regulatory framework within
which to do business, corruption will be encouraged and,
crucially, talented people will find it more profitable to
engage in the socially wasteful activity of lobbying the
government for subsidies, protection, tax or regulatory
relief. This socially wasteful lobbying is especially
harmful because it attracts scarce entrepreneurial talent
that would otherwise be devoted to helping the economy grow.
First, there is the risk that the wrong industries will be
identified. The market is a more reliable indicator of the
industries that have comparative advantage than any economic
model or theory. Over time this is particularly true, as
comparative advantage changes with technological
development. Moreover, targeting industries as
"winners" will generate rent-seeking where
industries will spend resources to obtain government
subsidies rather than attempting to compete more effectively
on the market. Governments often find it difficult to resist
these pressures. And assistance that is designed to be
temporary may become permanent. Thus, experience in most
countries has shown that a government policy of attempting
to "pick winners" is highly counter productive. |
| format |
Working Paper |
| author |
Tarr, David |
| author_facet |
Tarr, David |
| author_sort |
Tarr, David |
| title |
Government (Industrial) Policies for Competitiveness in a Global Economy |
| title_short |
Government (Industrial) Policies for Competitiveness in a Global Economy |
| title_full |
Government (Industrial) Policies for Competitiveness in a Global Economy |
| title_fullStr |
Government (Industrial) Policies for Competitiveness in a Global Economy |
| title_full_unstemmed |
Government (Industrial) Policies for Competitiveness in a Global Economy |
| title_sort |
government (industrial) policies for competitiveness in a global economy |
| publisher |
International Finance Corporation, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/160861484054779188/Government-industrial-policies-for-competitiveness-in-a-global-economy http://hdl.handle.net/10986/25929 |
| _version_ |
1764460478233313280 |