In regards to the effectiveness of sector-specific subsidies in general, Noland and Pack
conclude in their study of the so-called “Asian Miracle” that targeted industrial policy was only
marginally beneficial to the rates of growth of Japan, Korea, and Taiwan. Specifically, the
authors found that total factor productivity (TFP) growth rates did not support the theory of early
postwar advocates of industrialization that “the entire manufacturing sector, and perhaps the
entire economy, is the beneficiary of widely diffused external economies.” Instead, the TFP
growth which did occur within individual sectors was explained by more conventional
explanations such as learning-by-doing and the importation of foreign technology at the level of
the individual firm.19 This last point, particularly, should give us pause. For contrary to the oftproposed
notion that “countries are better able to apply new technology if the technology is developed at home,”20 this is evidence that individual firms can indeed succeed in the application
of technology – and by extension, knowledge – which has been developed abroad. Therefore,
the importance of industrial policy for promoting the development of specific sectors vis-à-vis
foreign rivals is not entirely clear, as individual firms appear entirely capable of adopting foreign
technology and appropriating it for their own benefit