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On import substitution, quality uncertainty and development policy (English)

This paper relates the consumer bias towards foreign goods in developing countries to the quality reputation of locally produced goods. It argues that consumers may be perceived to be discriminating if there is uncertainty about the quality of the locally produced goods. Such consumer uncertainty frustrates investment in high quality production. Given the uncertainty about quality, protection is not effective for promoting the production of high quality goods. Interest and credit policies, however, may be used to encourage investment in high quality production. Finally, it is argued that given quality uncertainty, export-oriented industrialization has advantages over import substitution strategies.

Details

  • Author

    Agbonyitor, Alberto D.K.

  • Document Date

    1986/12/31

  • Document Type

    Working Paper (Numbered Series)

  • Report Number

    DWA8605

  • Volume No

    1

  • Total Volume(s)

    1

  • Disclosure Date

    2012/02/13

  • Disclosure Status

    Disclosed

  • Doc Name

    On import substitution, quality uncertainty and development policy

  • Keywords

    high quality goods;import good;interest rate policy;learning by doing;local good;premium price;lack of knowledge;foreign direct investment;imperfect capital markets;high illiteracy rate;minimum quality standard;infant industry protection;cambridge university press;demand for money;market structure;import substitution;average price;foreign good;initial loss;local textile;capital formation;Political Economy;average cost;certification cost;quality labels;industrial strategy;financial repression;cultural change;development policy;information problem;development study;consumer information;local manufacturers;density function;International Trade;technical expertise;economic study;Economic Studies;domestic good;consumer attitude;present value;industrial growth;government intervention;quality certification;export good;manufacturing industry;colonial rule;manufactured goods;Economic Policy;administrative function;financial structure;political instability;consumer behaviour;adjustment program;foreign source;macroeconomic framework;social obstacle;market force;underdeveloped region;export promotion;industrialization strategy;local producer;windfall gain;alternative policy;information flow;adverse selection;consumer valuation;foreign consumers;behavioural assumptions;initial equilibrium;market mechanism;economic instability;government institution;perfect substitute;equilibrium price;accurate information;consumer income;foreign counterpart;quality information;minimum subsidy;government certification;demand function;foreign influence;product differentiation;negative value;uniform distribution;negative slope;production cost;market equilibrium;discount value;administrative capacity;consumer confidence;industrial expansion;world market;Research Support;credit policy;Credit policies;demonstration effect;consumption pattern;supply curve;market demand;consumer willingness;foreign management;consumer knowledge;

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Citation

Agbonyitor, Alberto D.K.

On import substitution, quality uncertainty and development policy (English). Country Analysis and Projections Division working paper ; no. DWA 1986-5 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/695581467986311477/On-import-substitution-quality-uncertainty-and-development-policy