Industrial Selection and Growth

German Echecopar

Abstract


The paper provides an argument for how selective industrial policies (targeting) can produce faster productivity growth. A model is developed to show that when learning externalities are present, targeting can increase the amount of learning that is produced and shared within the targeted sector. This effect will raise the sectoral and the economy-wide average productivity growth rates. The paper also discusses how targeting can speed output growth by raising the incentives to learn and by reducing investment risk.

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