This Is How Industrial Policy Can Go Bad
Odd Lots
Engage Beyond Comparative Advantage
Industrial policy challenges the traditional economic view of comparative advantage, which suggests countries should focus on their best-performing sectors as determined by market forces. In this framework, poorer nations are often relegated to labor-intensive and agricultural sectors, which limit their growth potential to lower-profit industries. This situation perpetuates a cycle where wealthier countries dominate the more lucrative sectors, leaving poorer nations with less profitable opportunities and vulnerable to exploitation of their natural resources. Thus, a reevaluation of specialization strategies is essential for the development of poorer countries to escape this cycle.
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