The Rise and Fall of Import Substitution
In the 1950s, many economists believed that import substitution – policies to restrict imports of manufactured goods – was the best trade strategy to promote industrialization and economic growth in developing countries. By the mid-1960s, there was widespread disenchantment with the results of such policies, even among its proponents. This paper traces the rise and fall of import substitution as a development idea. Perhaps surprisingly, early advocates of import substitution were quite cautious in their support for the policy and were also among the first to question it based on evidence derived from country experiences.
I wish to thank Michele Alacevich, Mauro Boianovsky, Anne Krueger, Arvind Panagariya, Claudio Sapelli, for helpful comments on earlier drafts of this paper. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.