ABSTRACT
Policies that favour domestic industry at the expense of foreign competitors are growing in number, and the use of these measures has accelerated worldwide. While localization barriers have been traditionally found in extractive sectors, they are now widely used across a variety of sectors, such as automobile, information technology, healthcare, or agriculture. The types of measures have also changed over time, with LCRs becoming more complex and less transparent. Where in the period right after the Global Financial Crisis, LCRs focused on ensuring inputs and labour were sourced locally, the years since 2014 saw a move towards incentivizing firms by offering tax breaks, preferential lending, or other “perks” tied to using local inputs or establishing local production. Analyzing a representative sample of these measures shows that, at best, they do little to stimulate the economy and, at worst, pull resources from other sectors of the economy, leading to overall declines in output and growth.
