Economic Nationalism, Productivity and Innovation: Evidence from a Developing Country

Laurence Go, Business Economics and Public Policy, The Wharton School, and Jonas Hjort, Columbia Business School

Abstract: Economic nationalism is an ideology which favors policies that emphasize domestic control of the economy. Previous work has documented that firm innovation/investment and firm productivity are important for economic growth. Hence, understanding how barriers to firm innovation/investment and restrictions on firm productivity is crucial to the study of development. In this project, a specific barrier is studied: that of foreign ownership restrictions. Historically, economic nationalism has been a policy that many nations have turned to in order to protect its local producers and domestic industries. Today, there seems to be a resurgence in the discussion of nationalist economic policies. This study explores the impacts of loosening industrial restrictions and barriers to ownership on firm innovation and investment, industrial productivity and economic growth, and provides quantitative evidence on such policies that are still being promoted by countries worldwide.