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Industrial Policy And Semiconductors: Missing The Target

by Andrew Ronald Dick

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Book Description
Industrial targeting policies that attempt to pick winners and losers in the marketplace remain popular, despite overwhelming evidence that the policies have been costly mistakes. The author critically evaluates the logic behind industrial targeting and explains why these policies fail simple cost-benefit tests. First, targeting rarely generates a net increase in industry employment, production, or profits. Second, even when the policy meets this first test, its benefits are usually outweighed by costs imposed on comsumers, who pay higher prices, and on taxpayers, who finance the government subsidies. Finally, even when targeting benefits exceed cost in one industry, by diverting scarce capital and labor resources from other industries, the policy typically lowers the economywide return.

Reviewing the track record of targeting in a wide range of American industries, the author finds that targeting has regularly failed those cost-benefit tests. And contrary to conventional wisdom, targeting's scorecard has been equally disappointing in Japan and South Korea, two countries that are frequently cited as examples of industrial policy successes. Furthermore, despite claims of policy activists, the semiconductor industry has not been an exception to the rule.



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