Does Brazil Need an Industrial Policy

This article discusses the convenience of adopting industrial policy in Brazil. We argue that the success of East Asian countries, usually explained by industrial policy, is mainly the result of horizontal policies. We also show that there are no theoretical or empirical foundations to most of the arguments used to justify industrial policy and that industrial policy must be motivated by market failures. We briefly discuss what market failures theoretically justify industrial policy, what the empirical relevance of these failures is and what the most adequate instruments are to be used in case of public intervention. From this perspective, we analyze the Brazilian industrial policy, such as described in Brasil (2003). Finally, we conclude that horizontal policies, besides being less subject to the influence of self-interested groups, have more potential to foster Brazilian growth.

  • Authors: Mauricio Canedo-Pinheiro, Pedro Cavalcanti Ferreira, Samuel De Abreu Pessoa & Luiz Guilherme Schymura
  • Year: 2007
  • Organisation: IBRE/FGV
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