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Revisiting the infant industry argument

Authors
Journal
Journal of Development Economics
0304-3878
Publisher
Elsevier
Publication Date
Volume
84
Issue
1
Identifiers
DOI: 10.1016/j.jdeveco.2006.10.001
Keywords
  • Learning By Doing
  • Infant Industry Protection
  • Growth
Disciplines
  • Economics

Abstract

Abstract This paper identifies a flaw in the infant industry argument that previous literature has ignored. A simple model first replicates the infant industry logic but subsequently shows that, in the presence of a ‘traditional technology’ with poor growth potential, the infant-industry logic is likely to fail. Under protectionism domestic producers substitute advanced technologies with the low-growth alternative, thereby inhibiting learning and economic growth. Protectionism's adverse effect on development is magnified by complementarities among advanced input goods and, under adequate conditions, in a three-country setting.

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