IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v75y2023ics0164070422000921.html
   My bibliography  Save this article

A political economy approach to endogenous industrial policies

Author

Listed:
  • Cheng, Wan-Jung

Abstract

This paper uses a political economy perspective to study the endogenous formation of economic policies and its interplay with political institutions. This paper provides a novel view that both the institutions and economic development status are essential factors in endogenously determining economic policies. The model aims to explain both the differences in the degree of adopting industrial policies as well as the differences in the types of industrial policies being implemented. Using a concise framework with two country-specific characteristics, the baseline model can capture three main types of industrial policy platforms of interest. In a country where voters’ political awareness is positively skewed and press freedom is relatively low, pro-heavy industry policies would be present most of the time; South Korea is representative of this type of countries. In a country where voters’ political awareness is positively skewed and press freedom is relatively high, there is usually an active industrial policy, though the target of the policy changes over time. Specifically, the policy is favoring the industry of which the industry-specific TFP is relatively high; Japan is representative of this type of countries. In a country where voters’ political awareness is negatively skewed and press freedom is relatively high, there is usually no active industrial policy; the U.S. is representative of this type of countries.

Suggested Citation

  • Cheng, Wan-Jung, 2023. "A political economy approach to endogenous industrial policies," Journal of Macroeconomics, Elsevier, vol. 75(C).
  • Handle: RePEc:eee:jmacro:v:75:y:2023:i:c:s0164070422000921
    DOI: 10.1016/j.jmacro.2022.103499
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070422000921
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jmacro.2022.103499?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Serra, Narcis & Stiglitz, Joseph E. (ed.), 2008. "The Washington Consensus Reconsidered: Towards a New Global Governance," OUP Catalogue, Oxford University Press, number 9780199534098.
    2. Nezih Guner & Gustavo Ventura & Xu Yi, 2008. "Macroeconomic Implications of Size-Dependent Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 721-744, October.
    3. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    4. Howard Pack & Kamal Saggi, 2006. "Is There a Case for Industrial Policy? A Critical Survey," The World Bank Research Observer, World Bank, vol. 21(2), pages 267-297.
    5. Pack, Howard & Saggi, Kamal, 2006. "The case for industrial policy : a critical survey," Policy Research Working Paper Series 3839, The World Bank.
    6. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-293, March.
    7. Masahiro Okuno-Fujiwara, 1991. "Industrial Policy in Japan: A Political Economy View," NBER Chapters, in: Trade with Japan: Has the Door Opened Wider?, pages 271-304, National Bureau of Economic Research, Inc.
    8. Anne O. Krueger & Jungho Yoo, 2002. "Chaebol Capitalism and the Currency-Financial Crisis in Korea," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 601-662, National Bureau of Economic Research, Inc.
    9. Baron, David P., 1994. "Electoral Competition with Informed and Uninformed Voters," American Political Science Review, Cambridge University Press, vol. 88(1), pages 33-47, March.
    10. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    11. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2013. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," American Economic Review, American Economic Association, vol. 103(1), pages 305-334, February.
    12. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    13. Lee, Jong-Wha & Lee, Hanol, 2016. "Human capital in the long run," Journal of Development Economics, Elsevier, vol. 122(C), pages 147-169.
    14. Naresh Khatri & Eric W K Tsang & Thomas M Begley, 2006. "Cronyism: a cross-cultural analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(1), pages 61-75, January.
    15. Michelle A. Clark, 1993. "The pitfalls of industrial policy," The Regional Economist, Federal Reserve Bank of St. Louis, issue Apr, pages 10-11.
    16. Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 358, January.
    17. Daron Acemoglu & James A. Robinson, 2006. "De Facto Political Power and Institutional Persistence," American Economic Review, American Economic Association, vol. 96(2), pages 325-330, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oleg S. Sukharev, 2024. "Development of Russia’s industry: Some regularities and prospects," Journal of New Economy, Ural State University of Economics, vol. 25(1), pages 6-25, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krieger, Tommy, 2022. "Democracy and the quality of economic institutions: Theory and evidence," ZEW Discussion Papers 22-032, ZEW - Leibniz Centre for European Economic Research.
    2. Tommy Krieger, 2022. "Democracy and the quality of economic institutions: theory and evidence," Public Choice, Springer, vol. 192(3), pages 357-376, September.
    3. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2011. "Emergence And Persistence Of Inefficient States," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 177-208, April.
    4. Pitelis, Christos & Kelmendi, Pellumb, 2009. "The political economy of European anti-trust and industrial policy," MPRA Paper 23941, University Library of Munich, Germany.
    5. Tilman Altenburg & Wilfried Lütkenhorst, 2015. "Industrial Policy in Developing Countries," Books, Edward Elgar Publishing, number 14726.
    6. Nathaniel Lane, 2020. "The New Empirics of Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 20(2), pages 209-234, June.
    7. Jan Grobovšek, 2020. "Managerial Delegation, Law Enforcement, and Aggregate Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(5), pages 2256-2289.
    8. Mishra, Saurabh & Lundstrom, Susanna & Anand, Rahul, 2011. "Service export sophistication and economic growth," Policy Research Working Paper Series 5606, The World Bank.
    9. Karl Aiginger, 2007. "Industrial Policy: A Dying Breed or A Re-emerging Phoenix," Journal of Industry, Competition and Trade, Springer, vol. 7(3), pages 297-323, December.
    10. Diego Restuccia, 2008. "The Latin American Development Problem," Working Papers tecipa-318, University of Toronto, Department of Economics.
    11. Krieger, Tommy, 2019. "Democracy and institutional quality: Theory and Evidence," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203507, Verein für Socialpolitik / German Economic Association.
    12. Harrison, Ann E. & Rodriguez-Clare, Andres, 2009. "Trade, Foreign Investment, and Industrial Policy," MPRA Paper 15561, University Library of Munich, Germany.
    13. Hallegatte, Stephane & Fay, Marianne & Vogt-Schilb, Adrien, 2013. "Green industrial policies : when and how," Policy Research Working Paper Series 6677, The World Bank.
    14. Anis Chowdhury, 2008. "Labor Market Policies as Instruments of Industry Policy: What Can Europe Learn from Southeast Asia?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 67(4), pages 661-681, October.
    15. Karl Aiginger & Susanne Bärenthaler-Sieber, 2009. "Industriepolitik in Österreich: von selektiver Intervention zu einem systemischen Ansatz?," WIFO Working Papers 337, WIFO.
    16. Kross, Karmo, 2013. "Developmental welfare capitalism in East Asia with a special emphasis on South Korea," Discourses in Social Market Economy 2013-05, OrdnungsPolitisches Portal (OPO).
    17. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    18. Jose Asturias & Manuel García-Santana & Roberto Ramos, 2019. "Competition and the Welfare Gains from Transportation Infrastructure: Evidence from the Golden Quadrilateral of India," Journal of the European Economic Association, European Economic Association, vol. 17(6), pages 1881-1940.
    19. Scott Gehlbach & Konstantin Sonin & Ekaterina Zhuravskaya, 2010. "Businessman Candidates," American Journal of Political Science, John Wiley & Sons, vol. 54(3), pages 718-736, July.
    20. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:75:y:2023:i:c:s0164070422000921. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.