Policies Facilitating Firm Adjustment to Globalization

29 Pages Posted: 22 Dec 2004

See all articles by Bernard Hoekman

Bernard Hoekman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR); Economic Research Forum (ERF)

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

This Paper focuses on policies facilitating firm adjustment to globalization. We briefly review the effects of trade and investment liberalization on firms, focusing on within-industry effects. We postulate that governments' role in supporting the process is to: (i) ensure that firms face 'right' incentives to adjust, and (ii) intervene in areas where market failures are present. The main message of the Paper is that while many policies could be adopted to address market failures, they need to be carefully designed and implemented in a stable macroeconomic environment. An institutional infrastructure that supports the functioning of modern markets is most important. Pro-active support policies of whatever stripe should be subject to cost benefit analysis, based on the existence of an identified market failure and monitored for performance and cost effectiveness. Transparency and accountability are critical in ensuring that interventions accomplish their intended objectives rather than being vehicles for rent seeking.

Keywords: Globalization, adjustment, government policies

JEL Classification: F02, F13, O19

Suggested Citation

Hoekman, Bernard and Javorcik, Beata Smarzynska, Policies Facilitating Firm Adjustment to Globalization (October 2004). Available at SSRN: https://ssrn.com/abstract=639167

Bernard Hoekman (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

via Boccaccio 121
Florence, Florence 50133
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Economic Research Forum (ERF) ( email )

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(P.O. Box: 12311)
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Egypt

Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

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Oxford
United Kingdom

World Bank - Development Research Group (DECRG) ( email )

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202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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