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Industrial policies pursued in many developing countries in the 1950s–1970s largely failed while the industrial policies of the Asian Miracles succeeded. We argue that a key factor of success is industrial policy with export orientation in contrast to import substitution. Exporting encouraged competition, economies of scale, innovation, and local integration and provided market signals to policymakers. Even in a large market such as India, import substitution policies in the automotive industry failed because of micromanagement and misaligned incentives. We also analyze the risk tradeoffs involved in various industrial policy strategies and their implications on the twenty-first-century industrial policies. While state interventions may be needed to develop some new capabilities and industries, trade protectionism is neither a necessary nor a sufficient tool and will most likely be counterproductive. [ABSTRACT FROM AUTHOR]

We investigate the effect of R&D subsidies on firms' innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms. This heterogeneity is robust using various estimators. Domestic firms have a larger response in R&D spending in low-tech and medium-term manufacturing, while the effect in high-tech manufacturing is larger for both domestic and foreign MNCs. In knowledge-intensive services and technological services, the response of domestic firms and in some cases foreign MNCs, is greater than that of domestic MNCs. In terms of patents, foreign MNC subsidiaries tend to have a larger count in high-tech manufacturing. [ABSTRACT FROM AUTHOR]

We argue that the economies that achieved inclusive growth, or high sustained and broad‐based growth while keeping a lid on the increase in market income inequality, are characterised by dynamism—a drive towards the acquisition of new capabilities in sophisticated products and processes. What a country produces and how much it competes domestically and internationally are important for achieving fair and inclusive markets. We show empirical evidence that dynamism, as measured by export sophistication, reduces market income inequality and poverty while increasing a broad concept of welfare. We explore policy options to steer industrial and market structures towards raising dynamism, thus providing growth opportunities for both workers and firms. [ABSTRACT FROM AUTHOR]

Recent technological developments and past technology transitions suggest that the world could be on the verge of a profound shift in transportation technology. The return of the electric car and its adoption, like that of the motor vehicle in place of horses in early 20th century, could cut oil consumption substantially in the coming decades. Our analysis suggests that oil as the main fuel for transportation could have a much shorter life span left than commonly assumed. In the fast adoption scenario, oil prices could converge to the level of coal prices, about $15 per barrel in 2015 prices by the early 2040s. In this possible future, oil could become the new coal. [ABSTRACT FROM AUTHOR]

The Asian miracles along with a handful of European economies and oil exporters are the few countries that reached high‐income status during 1960–2014. In contrast, many good‐performing countries such as Malaysia have been middle‐income countries for several decades despite relatively strong growth and a substantial improvement in education and export sophistication. We argue that the key factor differentiating the Asian miracles from economies like Malaysia is the creation of technologies by domestic firms and leapfrogging to the technological frontier at an early stage of development. Sophisticated tradable manufacturing and high‐tech innovation sectors offer opportunities for local technology creation, high potential spillovers, and sustainable growth and employment. [ABSTRACT FROM AUTHOR]

Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated. We argue that one can learn from these miracles and we suggest that three key principles were behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability. [ABSTRACT FROM AUTHOR]

We study the impact of macroeconomic shocks on US public debt dynamics using a VAR with debt feedback. Following a primary balance, or austerity, shock, the debt ratio initially declines but at a cost of lower growth. The debt ratio then rises to its pre-shock path, suggesting the austerity shock could be self-defeating. An inflation shock reduces the debt ratio initially, while a positive growth shock unambiguously lowers debt. Our specification, properly incorporating the debt equation, produces different debt impulse responses and forecasts from VAR models either excluding debt or including debt linearly. [ABSTRACT FROM AUTHOR]

Abstract: We study the effects of permanent and temporary income shocks on precautionary saving and investment in a “store‐or‐sow” model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment or a “volatility trap,” namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump‐shaped function of the volatility of permanent shocks, as predicted by the model. [ABSTRACT FROM AUTHOR]

• Continuous universal testing and isolation strategy is the most viable way to vanquish the pandemic while keeping the economy open with minimal restrictions. • The estimated cost of testing is dwarfed by its return, mitigating the economic fallout of the pandemic. • To implement universal testing, an epidemiological rather than clinical approach to testing—sacrificing accuracy for scalability, convenience, and speed—is required to reach a large share of population in short time. In the face of pandemics, a viable global strategy, beyond relying on the fast discovery of a vaccine or a cure, is needed. We study quantitatively the feasibility and effectiveness of mass testing to contain an epidemic. We also explore the implications of various smart testing strategies to decrease the needed testing rates. We use a modified SIR model with testing and extend the model to incorporate mobility patterns in a densely populated area. For a pandemic like COVID-19, model simulations show that the rate of testing needed to squash the curve within a month varies between 20–30 percent of the population randomly tested daily to less than 5 percent, combining periodic and group testing. We also show that mobility restrictions can enhance the efficacy of testing. Scale could be as important as accuracy in testing, implying that an epidemiological rather than clinical approach for the approval of tests is needed. The estimated cost of testing is dwarfed by its return, mitigating the economic fallout of the pandemic. Without a vaccine or a cure, mass testing is the only viable and less costly strategy to indefinitely "squash the curve" while allowing for major economic activities to resume. Planning and executing a testing strategy is necessary and urgent as an insurance policy against future pandemics. It should be considered as an investment to build a testing and isolation infrastructure, which should be maintained as part of the pandemic preparedness. [ABSTRACT FROM AUTHOR]