Industrial policy has been used throughout history in some form or other by most countries. Yet, it remains one of the most contentious issues among policymakers and economists alike. In part, this is because the empirical evidence on whether and how it should be implemented remains slim. Scant data on government subsidies, conflicting theoretical arguments, and the need to account for governments’ short and long-run objectives, render research particularly challenging. In this article, we outline a theory-based empirical methodology that relies on estimating an industry equilibrium model to measure hidden subsidies, assess their welfare consequences for the domestic and global economy, as well as evaluate the effectiveness of different policy designs. We illustrate this approach using the global shipbuilding industry as a prototypical example of an industry targeted by industrial policy, especially in periods of heavy industrialization. Just in the past century, Europe, followed by Japan, then South Korea, and more recently China, developed national shipbuilding programs to propel their firms to global leaders. Success has been mixed across programs, certainly by welfare metrics, and sometimes even by growth metrics. We use our methodology on China to dissect the impact of such programs, what made them more or less successful, and how we can justify why governments have chosen shipbuilding as a target.
Authors
- Acknowledgements & Disclosure
- We are thankful to Elhanan Helpman for helping parse through the literature on industrial policy. We are also grateful to Leran Qi for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33043
- Pages
- 27
- Published in
- United States of America
Table of Contents
- NBER WORKING PAPER SERIES 1
- INDUSTRIAL POLICY LESSONS FROM SHIPBUILDING 1
- Panle Jia Barwick Myrto Kalouptsidi Nahim B. Zahur 1
- Working Paper 33043 httpwww.nber.orgpapersw33043 1
- NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 October 2024 1
- Industrial Policy Lessons from Shipbuilding Panle Jia Barwick Myrto Kalouptsidi and Nahim B. Zahur NBER Working Paper No. 33043 October 2024 JEL No. L50 2
- Panle Jia Barwick University of Wisconsin-Madison Department of Economics 1180 Observatory Dr Madison WI 53706 and CEPR and also NBER panle.barwickgmail.com 2
- Myrto Kalouptsidi Department of Economics Harvard University Littauer 124 Cambridge MA 02138 and NBER myrtofas.harvard.edu 2
- Nahim B. Zahur Queens University Economics Department Canada nahimzahurgmail.com 2
- A Brief History of Global Shipbuilding 3
- The Changing Leader 4
- Note 5
- Source 5
- Industrial Policy and Shipbuilding Some Key Questions 7
- Chinese Industrial Policy in Shipbuilding 8
- Notes 10
- How to Estimate Effects of Sectoral Industrial Policy 11
- Illustration Chinas 21st Century Shipbuilding Program 14
- Framework 15
- How Big Were Chinas Production Subsidies 16
- Taking Dynamics into Account 16
- Output and Welfare 18
- Alternative Design of Industrial Policy 18
- Chinas Industrial Policy in Shipbuilding Why 20
- Ongoing Challenges of Research on Industrial Policy 22
- References 23
- Handbook of econometrics 23
- American Economic Journal Macroeconomics 23
- Empirical Methods for International Trade 23
- Trade policy issues and empirical analysis 23
- Review of Economic Studies accepted 23
- Econo- 24
- The East Asian Miracle Economic Growth and Public Policy 24
- Econometrica 24
- Handbook of 24
- International Economics Chapter 27 Vol. III 24
- Economics letters 24
- The Mariners Mirror 24
- American Economic Review 24
- Chinese Naval Shipbuilding An Ambitious and Uncertain Course 24
- The World Economy 24
- The Japanese Economy 24
- Politico 24
- Financial Times 24
- Journal of the European Economic Association 24
- Explorations in Economic History 24
- Handbook of development economics 25
- Journal of International 25
- Economics 25
- Trade policy and market structure 25
- Handbook of Industrial Organization 25
- Volume 5 25
- Econometrica 25
- Journal of the Econometric Society 25
- The Journal of Economic History 25
- The 25
- RAND Journal of Economics 25
- American Economic Review 25
- What When and How of Industrial Policy A Text- Based Approach August 15 2022 25
- Annual 25
- Review of Economics 25
- American Economic Review 25
- Review of Economic Studies 25
- The 25
- American Economic Review 25
- Journal of Industry Competition and Trade 25
- Quarterly 25
- Journal of Economics accepted 25
- The Quarterly Journal of Economics 26
- The Journal of Economic History 26
- The Review of Economics and Statistics 26
- Handbook of Regional and Urban Economics 26
- Journal of Economic Perspectives 26
- Industrial policy in an era of globalization Lessons from 26
- Asia 26
- The World 26
- Bank Research Observer 26
- The 26
- Journal of Economic History 26
- Middle East development journal 26
- American Economic Review 26
- Maritime Economics 26
- The politics of de-industrialisation the contraction of the West European shipbuilding 26
- Journal of political Economy 26
- American Economic Review 27
- Journal of Economic Literature 27
- World Trade Report 2006 Exploring the links between the subsidies trade and the WTO 27