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Industrial Policy in the Middle East and North AfricaRethinking the Role of the State$
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Ahmed Galal

Print publication date: 2008

Print ISBN-13: 9789774160509

Published to Cairo Scholarship Online: September 2011

DOI: 10.5743/cairo/9789774160509.001.0001

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The East Asian Industrial Policy Experience: Implications for the Middle East

The East Asian Industrial Policy Experience: Implications for the Middle East

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(p.81) Chapter 5 The East Asian Industrial Policy Experience: Implications for the Middle East
Source:
Industrial Policy in the Middle East and North Africa
Author(s):

Ahmed Galal

Publisher:
American University in Cairo Press
DOI:10.5743/cairo/9789774160509.003.0005

The earliest analytical justifications for industrial promotion policies took the form of “infant industry” or dynamic comparative advantage arguments. Many elaborations on this argument have been developed and among the most salient are those that relate to uncertainty and the informational requirements needed to implement a welfare-enhancing policy. Policy may actually reduce welfare relative to the market equilibrium if it shifts resources toward one sector of dynamic comparative advantage and away from another where the learning is even larger. An industrial policy through which the government acts as the precommitment mechanism was one way of solving this coordination failure. These arguments were developed in the context of what were implicitly closed economy models—that there was no possibility of simply importing the needed input or achieving scale economies by exporting.

Keywords:   infant industry, uncertainty, market equilibrium, scale economies, importing

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