Industrial policy, comparative advantages and growth

This article analyses the relations between the international specialization pattern and growth. For this purpose, it adopts as its analytical framework the recent literature emphasizing the importance of initial conditions and public policies, and not only factor endowment. It also analyses the empirical and economic policy implications of this approach. After an introduction (section I);, section II presents the analytical framework: a model with two internationally tradeable goods sectors and a non-tradeable inputs sector, with increasing returns to scale and dynamic pecuniary externalities. Section III draws the implications of the analysis in terms of the effects that industrial policies can have on the specialization pattern and the growth rate, while section IV does the same with respect to the initial conditions and real and monetary shocks. Section V examines the empirical information on the relations between the specialization pattern, the capital accumulation rate and growth, and finally section VI sums up the main conclusions of the study with regard to the scope and limitations of industrial policy.