ABSTRACT
The conditions under which the type of political regime affects a government's policy choices and a country's ability to successfully implement structural change are largely dependent upon its political capacity and its ability to restrict state-generated rents. The type of industrialization policy adopted may create very significant differences in the kinds of economic inefficiencies and distortions that are byproducts of that strategy. Shifting from an import-substitution toward an export-oriented policy requires a high degree of institutional credibility. Absent secure property rights and reliable contract enforcement, foreign investors and domestic entrepreneurs will be reluctant to sink large sums of capital into long-term ventures such as manufacturing. The possible presence of more than one industrial policy is one reason metric-level derivations of industrialization strategies is necessary in order to determine which is the dominant orientation in any given period.
