Working Paper: CEPR ID: DP1997
Authors: David B. Audretsch
Abstract: The purpose of this paper is to try to shed some new light on the current industrial policy crisis. This paper proposes that the industrial policy debate is shaped by knowledge about the functioning of the underlying industrial structure, which in turn is the Gegenstand of scholars in the field of industrial economics. The main conclusion is that the current industrial policy dilemma is the result of a shift in the fundamental long-run forces underlying the organization of industries. The declining long-run average cost curves characteristic of manufacturing for the better part of a century have given way to the generation and commercialization of new knowledge as the predominant economic force determining comparative advantage. The traditional instruments of industrial policy - anti-trust, regulation and public ownership - have correspondingly given way to a new set of industrial policies that, rather than focusing on restraining the freedom of large corporations to contract, are devoted to the creation and commercialization of new knowledge.
Keywords: industrial policy; economic development; industrial evolution; industry evolution; antitrust regulation; public ownership
JEL Codes: L00; L1; L4; L5; O1; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shift from traditional industrial policy instruments (L52) | new industrial policies (O25) |
| declining long-run average cost curves (D24) | generation and commercialization of new knowledge (O36) |
| knowledge as a key economic force (D89) | shift in industrial policy (L52) |
| traditional instruments of industrial policy (L52) | less effective in addressing contemporary economic challenges (E69) |
| shift in industrial policy (L52) | emphasis on knowledge creation (O36) |