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|dc.description.abstract||Theoretical analyses of industrial policy normally restrict the range ofpossible outcomes by abstracting from either market or governmentfailures. This paper thus studies industrial policy and its effectivenessin a model that includes both market and government imperfections.We introduce a public agency responsible for industrial policy into themodel of Hausmann and Rodrik (2003), and assume that this agencyhas limited information and is partly politically motivated. We furtherextend the model to allow the public agency to communicate with en-trepreneurs and the entrepreneurs to engage in rent seeking. We findthat industrial policies are ineffective if the public agency is poorlyinformed, but that they are not necessarily ineffective if the publicagency is highly politically motivated. Given a highly politically mo-tivated public agency, industrial policies are effective if and only if theinstitutional setting ensures that such policies are modest e.g. by re-stricting the public agency?s budget. Moreover, our model helps us tounderstand why the same industrial policies that have failed elsewherehave been relatively successful in South Korea and Taiwan.||en_US|
|dc.relation.ispartofseries|||aProceedings of the German Development Economics Conference, Berlin 2006 / Verein für Socialpolitik, Research Committee Development Economics |x13||en_US|
|dc.subject.keyword||Market and Government Failures||en_US|
|dc.title||Industrial Policy in an Imperfect World||en_US|
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