Industrial Policy - A Round Up of Historical Case Studies (and Beyond)

This is a short literature review of recent papers on industrial policy (and related topics) , focusing on work coming from economic historians. It is taken somewhat–though not entirely–from an upcoming literature review I have written on the empirics of industrial policy. (Stay tuned for more contemporary policy discussions.)

I. Output Protection: Temporary and Otherwise.

A. France.
First things first. Reka Juhasz (2018) study has been widely discussed–for good reason. It is one of the first attempts to unpack the impact of infant industry policy using contemporary causal inference. In this case using the Napoleonic blockade of England as a short-term shock that a) mimicked a temporary protection policy of French textile producers, the spatial scope of which meant b) different regions of French producers were subjected to different amounts of protect. See the AEA’s writeup here. Following up on this, a new paper Bécuwe and Blancheton (2018) considers the role of protection and the long-run impact on British textiles, albeit from a more case-study business history approach.

Bécuwe, S., and Blancheton, B. (2018). French textile specialisation in long run perspective (1836–1938): trade policy as industrial policy. Business History, 1–21. https://doi.org/10.1080/00076791.2018.1494732 [Ungated: ]

Juhasz, R. (2018). Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade. American Economic Review, 108(11), 3339–3376. https://doi.org/10.1257/aer.20151730 [Ungated: http://www.rjuhasz.com/research/juhasz_blockade.pdf]

B. Canada.
Industrial policy is often associated with postwar East Asian economies and the input substitution industrialization (ISI) of Latin American. Of course, most Western nations pursued significant industrial policies throughout their development path. One canonical example is Canada’s National Policy in the late 19th century. An interesting wave of papers have explored the development impact of the National Policy on Canadian industrialization: Alexander and Keay (2018), Harris, Keay, and Lewis (2015), and Inwood, and Keay, (2013).

Alexander, P. D., and Keay, I. (2018). A general equilibrium analysis of Canada’s national policy. Explorations in Economic History, 68, 1–15. https://doi.org/10.1016/j.eeh.2017.11.002 [Ungated: https://www.bankofcanada.ca/wp-content/uploads/2017/05/swp2017-18.pdf]

Harris, R., Keay, I., and Lewis, F. (2015). Protecting infant industries: Canadian manufacturing and the national policy, 1870–1913. Explorations in Economic History, 56, 15–31. https://doi.org/10.1016/j.eeh.2015.01.001 [Ungated: https://pdfs.semanticscholar.org/d357/cb822e40abea4b4d56d4383824738907fbc9.pdf]

Inwood, K., and Keay, I. (2013). Trade policy and industrial development: iron and steel in a small open economy, 1870−1913. Canadian Journal of Economics/Revue Canadienne d’économique, 46(4), 1265–1294. https://doi.org/10.1111/caje.12048 [Ungated: http://www.econ.queensu.ca/files/other/inwoodkeay13.pdf]

II. Temporary Subsidies and Spillovers
Besides temporary protection of output per se, a number of studies have considered the effect of other temporary interventions. For example, Hanlon (2018), considers how the temporary cost advantages related to steel jump-started the U.K.’s lead in metal ship building, and the role labor market spillovers played in maintaining their leadership. On the other side of the Atlantic, Hanlon also focuses on how interventions allowed U.S. producers to transition from wood to steel.

Mitrunen (2019) also looks at the labor market spillovers of a particularly interesting intervention, focusing Finland’s postwar reparations to the Soviet Union. The reparations policy mandated that Finland pay Stalin in the form of heavy industrial commodities. Accordingly, Mitrunen studies reparations as a type of forced export industrial policy, focusing on the effects on skilled labor–contemporaneous and intergenerational effects.

Jaworski and Smyth (2018) considers how U.S. government purchases during wartime helped the “big names” of the U.S. aeronautical industry. In particular, these purchases allowed U.S. manufacturers survive later turbulent periods of shakeout.

In this bucket, is also my own study on South Korea’s heavy chemical and industry big push. Here (Lane 2017), I focus on the impact of a temporary big push policy, emphasizing linkage effects of industrial targeting. [Read my piece on this here.] Similarly, Pons-Benaiges (2017) job market paper explores the composition and scope of Japan’s postwar industrial policy. His paper is, in part, a reply to a classic piece by Beason and Weinstien (1996), which asked whether Japanese interventions targeted sectors with increasing returns to scale.

Hanlon, W. (2018). The Persistent Effect of Temporary Input Cost Advantages in Shipbuilding, 1850-1911. Working Paper. [Ungated: walkerhanlon.com/papers/hanlon_shipbuilding.pdf]

Jaworski, T., and Smyth, A. (2018). Shakeout in the early commercial airframe industry. The Economic History Review, 71(2), 617–638. https://doi.org/10.1111/ehr.12430

Lane, N. (2017). Manufacturing Revolutions - Industrial Policy and Networks in South Korea. Working Paper. [Ungated: eh.net/eha/wp-content/uploads/2017/08/Lane.pdf]

Mitrunen, M. (2019). War Reparations, Structural Change, and Intergenerational Mobility. Working Paper. [Ungated: https://www.dropbox.com/s/ohl6zqyi4ctkclw
/Mitrunen_JMP.pdf?dl=0]

Pons-Benaiges, O. (2017). Did Government Intervention Target Technological Externalities? Industrial Policy and Economic Growth in Postwar Japan, 1964-1983. Working Paper. https:// economics.stanford.edu/sites/g/files/ sbiybj9386/f/oriol_jmp.pdf

III. Managerial and technological interventions
Giorcelli (2019) is a fantastic take on a large industrial intervention. The factor accumulation promoted by the Marshall Plan across Western Europe looms large as an explanation behind “Les Trente Glorieuses”—the decades of sustained economic growth following World War II. Giorcelli focuses on the long-run implications of a particularly successful Marshall Plan project in Italy, the United States Technical Assistance and Productivity Program (1952–58). Specifically, the policy focused on both transferring technology–and more importantly–modern managment techniques to Italian firms:

Giorcelli, M. (2019). The Long-Term Effects of Management and Technology Transfers. American Economic Review, 109(1), 1–33. https://www.aeaweb.org/articles?id=10.1257/aer.20170619 [Ungated: www.giorcellimichela.com/uploads/8/3/7/0/83709646/giorcelli_jmp.pdf]

16 Jan 2019