Picking Winners: Solving an Industrial Policy Problem with a Sustainable Growth Model Available to Purchase

Sustainable growth indicates how rapidly sales can increase when new assets required to support higher sales levels are financed solely through additions to retained earnings and new debt. The sustainable growth model provides a way for public policy makers to assess the need of any particular sector of an economy for government‐sponsored export development assistance. These assessments are the macro equivalent of product portfolio analysis. The sustainable growth approach, however, is less subjective and requires far less data input than the directional policy matrix approach recommended by others. The two approaches should be viewed as complementing one another. Selection of export development programmes can be improved by assessing the impact of any given programme on the components of an industry′s sustainable growth level. This should help to avoid initiatives that would impair the global or regional competitiveness of industries with long‐term comparative advantages.