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Question 1

What are a Market failure justification for infant industry Protection?

Answer 1

• The argument for protecting an industry in its early growth must be related to some particular set of market failures that prevent Private markets from developing the industry as rapidly as they should.

Question 2

Why not encourage both import substitution and exports?

Answer 2

• A tariff that reduces imports also necessarily reduces exports.
• There was A belief that industrialization was necessarily based on a substitution of domestic industry for imports rather then on a growth of manufactured exports.
• Import-substitution drive stopped short of its logical limit
• Policy makers has shifted from trying to encourage import substitution to trying to correct the damage done by bad import substitution policies.

Question 3

What are the Problems with import-substituting policies?

Answer 3

• The infant industry argument is not as universally valid as many had assumed.
• Protection will not create a competitive manufacturing sector if there are fundamental reasons why a country lacks a comparative advantage in manufacturing.
• Poor countries lack skilled labour, entrepreneurs and managerial competence and have Problems of social organization that make it difficult for these countries to maintain reliable supplies.

Question 4

What is the Cost of import substituting policies?:

Answer 4

An inefficiently small scale.

Question 5

What is Dani Rodrik’s Trilemma?

Answer 5

Rodrik’s trilemma hypothesizes that states can only choose two of the three parts of the trilemma: globalization, national sovereignty or democratic policies.

Question 6

What happens If they try to choose three all at once?

Answer 6

the System will be unstable. Thus states developed different sorts of political strategies based on the trilemma in order to adapt their governments to the globalized world

Question 7

What are some negative effects that has come by Globalization?

Answer 7

an economic crisis, migration, delocalization etc.

Question 8

How is the Government Policy to Promote industrialization often justified and when is it only valid?

Answer 8

By the infant industry argument but only valid if it can be cast as a market failure argument for intervention. Two other usual justifications are the existence of imperfect capital markets and the problem of appropriability of knowledge generated by pioneering firms.

Question 9

How has Asian economies grown?

Answer 9

not via import-substituting but via exports.

Question 10

What are the three parts of Rodrik’s trilemma?

Answer 10

Globalization, national sovereignty or democratic policies.