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Creating a Learning SocietyA New Approach to Growth, Development, and Social Progress$
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Joseph Stiglitz and Bruce Greenwald

Print publication date: 2014

Print ISBN-13: 9780231152143

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231152143.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 25 September 2021

The Infant-Economy Argument for Protection

The Infant-Economy Argument for Protection

Trade Policy in a Learning Environment

Chapter:
(p.331) Chapter Eleven The Infant-Economy Argument for Protection
Source:
Creating a Learning Society
Author(s):

Joseph E. Stiglitz

Bruce C. Greenwald

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231152143.003.0011

This chapter presents the infant-economy argument for protection. It argues that protectionism can be an important instrument for helping infant economies grow by creating a learning society. It provides a fully articulated rationale for protection based on market failures derived from information asymmetries and endogenous learning and innovation with learning externalities. While earlier chapters highlighted that there were multiple market failures inherently associated with innovation, the chapter focuses more narrowly on learning externalities. In this perspective, industrial and trade policy is not focused on picking winners, nor is it predicated on the belief that government can do a better job than the private sector of picking winners. It is based on the notion that learning involves spillovers that will be imperfectly internalized in a market economy. The chapter further demonstrates the role of trade policy by continuing the analysis of the simple two-sector model with an industrial and a traditional sector introduced in Chapter 7, extending it to an open economy.

Keywords:   infant-industry argument, infant-economy argument, learning society, protectionism, developing countries, trade policy, open economy

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