Working Paper: NBER ID: w4417
Authors: Dani Rodrik
Abstract: This paper reviews recent theory and evidence on trade and industrial policy reform in developing countries. First, the theoretical and empirical basis of the rationales for policy reform are discussed. Next, two sources of heterodoxy are identified and evaluated: (a) the East Asian experience with interventionist industrial policies; (b) recent models of imperfect competition. The survey then turns on strategic issues in reform, and discusses the theory of piecemeal reform, tax or tariff uniformity, credibility, political economy, and interactions with stabilization policy. The penultimate section reviews the available evidence on the consequences of recent policy reform.
Keywords: trade policy; industrial policy; developing countries; structural adjustment; economic reform
JEL Codes: N00; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic liberalization (P19) | reduced static inefficiencies (D61) |
| economic liberalization (P19) | improved resource allocation and efficiency (D61) |
| economic liberalization (P19) | enhanced technological change (O33) |
| economic liberalization (P19) | economic growth (O49) |
| outward-oriented economies (F43) | better equipped to cope with external shocks (F41) |