ABSTRACT
The debate over the appropriate extent, nature, and timing of government policies to foster economic growth has a long history. John Stuart Mill's well-known infant industry argument emphasized the advantage of an early start in a new venture, the problems of differential social and private risk taking, as well as the temporary nature of intervention. More recently, the classical infant industry argument has been reinvented in the form of ‘strategic trade policies’ (Krugman, 1983) which extends the role of government policy in a developed economy to trade policy as well. Policy is seen as an instrument to improve competitiveness in specific product areas (e.g., integrated circuits) by creating and drawing the benefits from first mover advantages.
