IMPORT LIBERALIZATION AND INDUSTRIAL-PERFORMANCE - THE CONCEPTUAL UNDERPINNINGS

Import liberalization is a centrepiece of conventional approaches to p olicy reform and structural adjustment. Despite substantial criticism of the effects of liberalization, the underlying economic reasoning is widely accepted. This article examines the ways in which different sc hools of thought analyse the effect of 'opening up' the economy on ind ustrial development, and contrasts neoclassical and evolutionary appro aches. Different conceptualizations of 'market failure' emerge as the focal point for differences in discussing the role and scope of govern ment intervention, with a convergence between the information-economic s and firm-level evolutionary approaches (particularly the 'technologi cal capabilities' approach). The empirical literature and its interpre tation by different schools are reviewed, demonstrating how policy rec ommendations are strongly affected by the particular theory that infor ms the analysis of market failure and efficiency. It is concluded that empirically oriented micro-level approaches are the most promising in guiding policy decisions.