Does the data support the neo-mercantilist preoccupation with protecting manufacturing?

Date

2011-10

Journal Title

Journal ISSN

Volume Title

Publisher

ARTNeT, United Nations ESCAP

Abstract

The assumption that manufacturing value-added share of gross domestic product (GDP) propels economic growth is often used as a justification for protectionist measures such as tariffs and subsidies, which cause costly economic distortions. However, the protectionist assumption that manufacturing is crucial to an economy is not unambiguously supported by the data. Moreover, even when we control for variables relative to growth, we find no definitive evidence for a relationship. We conclude that manufacturing can be promoted by either protectionism or better governance. The choice? Better governance raises economic efficiency while protectionism lowers it.

Description

Keywords

ECONOMIC STRUCTURE, PROTECTIONISM, MANUFACTURING, ECONOMIC GROWTH, ECONOMETRIC ANALYSIS, GOVERNANCE, GOVERNMENT ROLE, LABOUR ECONOMICS, EDUCATION, INDUSTRIAL POLICY, TRADE POLICY

Citation

DOI