International competitiveness and policy in dynamic industries
Keywords:Dynamic industries, investment, government policy
The work provides an analysis of “dynamic industries” to shed new light on the role of state intervention in the promotion of the international competitiveness of domestic firms, highlighting the difficulty of formulating such a policy in the presence of multinational enterprises. The concepts of “mandated investment expenditures” and “discretionary profits” for dynamic industries in a closed economy context are defined and a simple formalisation for the follower-firm problem is presented. The authors open up the model to international trade in goods and focus on the implication of government policies and national institutions. Mandated investment expenditures in a model of international trade in goods and factors of production are then considered.
JEL: F40, L78, O38