Industrial policies (IPs) are commonly used by countries to promote targeted sectors, but may have significant impacts on downstream sectors. Using a new hand-collected database of steel-sector IP use in major steel-producing countries, I find that IP use is quite harmful to downstream sectors. A one-standard-deviation increase in steel IP presence leads to a 1.2% decline in export competitiveness for the average downstream manufacturing sector in the first few years of its application, and a 6% decline for downstream sectors that use steel most intensively. These results are largely driven by the less-developed countries in my sample.
Blonigen, B.A. Industrial Policy and Downstream Export Performance. The Economic Journal (2013) : [DOI: 10.1111/ecoj.12223]