Linkages and Industrial Policy for Eastern Europe

It is argued that industrial policy for Eastern Europe is required to reduce the social costs of transition. The proposed industrial policy is based on unbalanced growth focused on key sectors that, according to linkage analysis, influence the economy more than other sectors. An attempt should be made to increase efficiency in key sectors, either through new investment or by closing down inefficient enterprises. This strategy could be adopted temporarily, gradually changing the existing structure of the economy rather than reinforcing it. In order to illustrate the potential of such an industrial policy, a sector-specific approach is designed for Poland using a computable general equilibrium (CGE) model. The simulation results show that macroeconomic performance - measured by output, employment and funds available for investment - is much better when industrial policy has been concentrated on a key sector.

  • Authors: Subrata Ghatak and Barbara Roberts
  • Year: 1997
  • Organisation: University of Leicester
  • Publisher: Routledge. Tailor and Francis Group
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