Optimal industrial targeting with unknown learning-by-doing
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We examine a government's optimal targeting policy when it has limited information about the learning curves of domestic producers. Popular arguments suggest that in order to promote learning-by-doing, the government might want to protect domestic producers from foreign competition by temporarily closing the domestic market to foreign producers. We identify a set of conditions under which such trade intervention is not optimal. Instead, domestic welfare is better fostered either by no government intervention, or by providing subsidies to the most capable domestic producers who are willing to set a particularly low domestic price for their product. © 1995.
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Walter M. Upchurch, Jr. Distinguished Professor of Business Administration
Tracy Lewis is Professor of Economics at the Fuqua School of Business at Duke University, where he holds the Black Chair in Economics. Professor Lewis founded the Innovation Center at the University. Prior to joining the Duke University Faculty in 2003, he served on the faculties at the University of Florida, at the California Institute of Technology, the University of British Columbia, and the University of California, Davis. Aside from academic employment, he has also held positions at the Fed