Report
Patrick Artus

What happens if a country subsidises an industry in which it has no comparative advantage?

We will illustrate this point with the example of France. France has decided to subsidise the development of industries in which it has no comparative advantage s (batteries and electric cars, semiconductors, active ingredients in medicines). France's lack of comparative advantage s in these products is due to the low spontaneous development of these industries, the lack of industrial skills, and high labour and energy costs. If the economic policy chosen is to subsidise the development of industries in which the country has no comparative advantages: Production cost s in these industries will be higher than in other countries, hence the need to maintain subsidies over the long term; There is a risk that there will be a shortage of employees available to work in these industries, resulting in underutilisation of the facilities that have been built. There are therefore two limits to the policy of subsidising industries in which a country has no comparative advantages : the limit in terms of available public money, and the limit in terms of employment resources.
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Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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