Policies Facilitating Firm Adjustment to Globalization

Abstract

This paper focuses on policies facilitating firm adjustment to globalization. We briefly review the effects of trade and investment liberalization on firms, focusing on within-industry effects. We postulate that governments' role in supporting the process is to: (i) ensure that firms face "right" incentives to adjust, and (ii) intervene in areas where market failures are present. The main message of the paper is that while many policies could be adopted to address market failures, they need to be carefully des…