IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/1622.html
   My bibliography  Save this paper

Heterogeneous Entrepreneurs, Government Quality and Optimal Industrial Policy

Author

Abstract

This paper presents a theoretical model exploring the effects of industrial policy (IP) when entrepreneurs are characterized by different ability levels and sectors are heterogeneous as for their profitability and social externalities generated. The optimal structure of IP in terms of monetary transfers is shown to crucially depend on the distribution of entrepreneurs abilities. Moreover, we find that IP increases aggregate welfare under very general conditions, also in the presence of Government failures. In an extension of the model, we consider the case in which the Government can use also the provision of business training to entrepreneurs as an additional instrument of IP. Based on these results, policy implication for industrial policy in developing countries are discussed.

Suggested Citation

  • Michele Di Maio & Giorgio Fabbri & Vincenzo Lombardo, 2016. "Heterogeneous Entrepreneurs, Government Quality and Optimal Industrial Policy," AMSE Working Papers 1622, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:1622
    as

    Download full text from publisher

    File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2016_-_nr_22.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harrison, Ann & Rodríguez-Clare, Andrés, 2010. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4039-4214, Elsevier.
    2. Nelson, Richard R & Pack, Howard, 1999. "The Asian Miracle and Modern Growth Theory," Economic Journal, Royal Economic Society, vol. 109(457), pages 416-436, July.
    3. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    4. Szirmai, Adam, 2012. "Industrialisation as an engine of growth in developing countries, 1950–2005," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 406-420.
    5. Ocampo, Jose Antonio & Ros, Jaime (ed.), 2011. "The Oxford Handbook of Latin American Economics," OUP Catalogue, Oxford University Press, number 9780199571048.
    6. Marcus Noland & Howard Pack, 2002. "Industrial Policies and Growth: Lessons From International Experience," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.),Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 9, pages 251-308, Central Bank of Chile.
    7. Sanjaya Lall, 1996. "Learning from the Asian Tigers," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-38989-2, December.
    8. Bjorvatn, Kjetil & Coniglio, Nicola Daniele, 2012. "Big push or big failure? On the effectiveness of industrialization policies for economic development," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 129-141.
    9. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
    10. Szirmai, Adam & Naude, Wim & Alcorta, Ludovico (ed.), 2013. "Pathways to Industrialization in the Twenty-First Century: New Challenges and Emerging Paradigms," OUP Catalogue, Oxford University Press, number 9780199667857.
    11. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," The World Bank Research Observer, World Bank, vol. 29(1), pages 48-82.
    12. Hodler, Roland, 2009. "Industrial policy in an imperfect world," Journal of Development Economics, Elsevier, vol. 90(1), pages 85-93, September.
    13. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    14. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 423-423.
    15. Antonio Andreoni & Mike Gregory, 2013. "Why and How Does Manufacturing Still Matter: Old Rationales, New Realities," Revue d'économie industrielle, De Boeck Université, vol. 0(4), pages 21-57.
    16. Ha-Joon Chang & Antonio Andreoni & Ming Leong Kuan, 2013. "International Industrial Policy Experiences & the Lessons for the UK," Working Papers wp450, Centre for Business Research, University of Cambridge.
    17. Kjetil Bjorvatn & Nicola D. Coniglio, 2006. "Policy Design and Rent Seeking: Targeted versus Broad Based Intervention," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 577-585, November.
    18. Cimoli, Mario & Dosi, Giovanni & Stiglitz, Joseph E. (ed.), 2009. "Industrial Policy and Development: The Political Economy of Capabilities Accumulation," OUP Catalogue, Oxford University Press, number 9780199235278.
    19. repec:unu:wpaper:unupb2-2013 is not listed on IDEAS
    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. Thomas Hellmann & Veikko Thiele, 2019. "Fostering Entrepreneurship: Promoting Founding or Funding?," Management Science, INFORMS, vol. 67(6), pages 2502-2521, June.

    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. Rougier, Eric, 2016. "“Fire in Cairo”: Authoritarian–Redistributive Social Contracts, Structural Change, and the Arab Spring," World Development, Elsevier, vol. 78(C), pages 148-171.
    2. Naudé, Wim, 2017. "Entrepreneurship, Education and the Fourth Industrial Revolution in Africa," IZA Discussion Papers 10855, Institute of Labor Economics (IZA).
    3. Michael Landesmann & Roman Stöllinger, 2020. "The European Union’s Industrial Policy: What are the Main Challenges?," wiiw Policy Notes 36, The Vienna Institute for International Economic Studies, wiiw.
    4. Dosi, Giovanni & Roventini, Andrea & Russo, Emanuele, 2019. "Endogenous growth and global divergence in a multi-country agent-based model," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 101-129.
    5. Sergio G. Lazzarini, 2015. "Strategizing by the government: Can industrial policy create firm-level competitive advantage?," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 97-112, January.
    6. Naude, Wim & Nagler, Paula, 2015. "Industrialisation, Innovation, Inclusion," MERIT Working Papers 2015-043, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. David Atkin & Amit K. Khandelwal & Adam Osman, 2017. "Exporting and Firm Performance: Evidence from a Randomized Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 551-615.
    8. Lectard, Pauline & Rougier, Eric, 2018. "Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization," World Development, Elsevier, vol. 102(C), pages 90-110.
    9. Gui-Diby, Steve Loris & Renard, Mary-Françoise, 2015. "Foreign Direct Investment Inflows and the Industrialization of African Countries," World Development, Elsevier, vol. 74(C), pages 43-57.
    10. Nebojsa Stojcic & Edvard Orlic, 2016. "Foreign Direct Investment And Structural Transformation Of Exports," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 25(2), pages 355-378, december.
    11. Lane, Nathaniel, 2016. "Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea," SocArXiv 6tqax, Center for Open Science.
    12. Gine, Xavier & Mansuri, Ghazala, 2014. "Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan," Policy Research Working Paper Series 6959, The World Bank.
    13. repec:spo:wpmain:info:hdl:2441/46k9rkvut99i7qnn4vqm25t53b is not listed on IDEAS
    14. Inés Butler & Gabriela Galassi & Hernán Ruffo, 2016. "Public funding for startups in Argentina: an impact evaluation," Small Business Economics, Springer, vol. 46(2), pages 295-309, February.
    15. repec:hal:spmain:info:hdl:2441/46k9rkvut99i7qnn4vqm25t53b is not listed on IDEAS
    16. Lazzarini, Sérgio G., 2012. "Strategizing by the Government: Industrial Policy and Sustainable Competitive Advantage," Insper Working Papers wpe_289, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    17. Antonio Andreoni & Ha-Joon Chang, 2016. "Industrial policy and the future of manufacturing," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 43(4), pages 491-502, December.
    18. Mulatu, Abay, 2016. "On the concept of 'competitiveness' and its usefulness for policy," Structural Change and Economic Dynamics, Elsevier, vol. 36(C), pages 50-62.
    19. Pranab Bardhan, 2016. "State and Development: The Need for a Reappraisal of the Current Literature," Journal of Economic Literature, American Economic Association, vol. 54(3), pages 862-892, September.
    20. Jinran Chen & Lijuan Xie, 2019. "Industrial policy, structural transformation and economic growth: evidence from China," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-19, December.
    21. Mario F Carillo, 2021. "Agricultural Policy and Long-Run Development: Evidence from Mussolini's Battle for Grain," The Economic Journal, Royal Economic Society, vol. 131(634), pages 566-597.
    22. Wim Naudé, 2008. "Entrepreneurship in Economic Development," WIDER Working Paper Series RP2008-20, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Entrepreneurs; Heterogeneous Abilities; Training.;
    All these keywords.

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:aim:wpaimx:1622. 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: Gregory Cornu (email available below). General contact details of provider: https://edirc.repec.org/data/amseafr.html .

    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.