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Comparative Advantage, Industrial Policy and the World Bank: Back to First Principles

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  • Singh, A.

Abstract

This paper provides a critical analysis of the World Bank's new thinking on industrial policy. After outlining the changing perspectives on industrial policy put forward by the World Bank over the last three decades, we argue that the bank's economists have taken one step forward (the approval for the enhanced role of the state) but also one if not two steps backward (by strong encouragement to countries to seek their current comparative advantage in pursuing industrial policy). We argue that a critical analysis of the World Bank's policy stance on industrial policy as on other main issues is essential because of the institution's hegemony in policy analysis of economic development as well as its conditionality, which may now well include what this paper regards as its inappropriate industrial policy. The analysis in the paper combines classical contributions on international trade and the world economy, relevant economic history, as well as Krugman's comments on these issues in terms of modern economic analysis. The paper concludes with reflections on the appropriate industrial policy for developing countries that the World Bank should support.

Suggested Citation

  • Singh, A., 2011. "Comparative Advantage, Industrial Policy and the World Bank: Back to First Principles," Working Papers wp418, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp418
    Note: PRO-2
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    1. Glyn, Andrew & Hughes, Alan & Lipietz, Alan & Sigh, Ajit, "undated". "The Rise and Fall of the Golden Age," WIDER Working Papers 295573, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    2. Calsamiglia, Xavier, 1977. "Decentralized resource allocation and increasing returns," Journal of Economic Theory, Elsevier, vol. 14(2), pages 263-283, April.
    3. Alex Izurieta & Ajit Singh, 2010. "Does Fast Growth in India and China Help or Harm US Workers?," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 11(1), pages 115-141.
    4. Ajit Singh & Ann Zammit, 2011. "The Global Economic and Financial Crisis: Which Way Forward?," Palgrave Macmillan Books, in: Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), An Assessment of the Global Impact of the Financial Crisis, chapter 3, pages 36-59, Palgrave Macmillan.
    5. Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), 2011. "An Assessment of the Global Impact of the Financial Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30691-2, December.
    6. Ajit Singh, 1998. "Financial liberalisation, stockmarkets and economic development," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 8(1), pages 165-182.
    7. Lin,Justin Yifu, 2009. "Economic Development and Transition," Cambridge Books, Cambridge University Press, number 9780521514521, October.
    8. Karl Aiginger, 2007. "Industrial Policy: Past, Diversity, Future; Introduction to the Special Issue on the Future of Industrial Policy," Journal of Industry, Competition and Trade, Springer, vol. 7(3), pages 143-146, December.
    9. Eatwell, John & Taylor, Lance (ed.), 2002. "International Capital Markets: Systems in Transition," OUP Catalogue, Oxford University Press, number 9780195154986.
    10. repec:bla:devpol:v:27:y:2009:i:5:p:483-502 is not listed on IDEAS
    11. Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), 2011. "The Financial Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30394-2, December.
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    Cited by:

    1. 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.
    2. Evelyn Dietsche, 2017. "New industrial policy and the extractive industries," WIDER Working Paper Series 161, World Institute for Development Economic Research (UNU-WIDER).
    3. Wolf, Christina, 2023. "Demand-growth in support of structural change: Evidence from Nigeria's formal manufacturing sector," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 347-358.
    4. Johannes Schwarzer, 2016. "Trade and Employment. An Overview," Discussion Notes 1601, Council on Economic Policies.
    5. Pauline Lectard & Eric Rougier, 2018. "Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization [Les pays en dével," Post-Print hal-04587399, HAL.
    6. Evelyn Dietsche, 2017. "New industrial policy and the extractive industries," WIDER Working Paper Series wp-2017-161, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    World Bank; industrial policy; economic development; trade;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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