Industrial Policy in Relation to Automobile Production after the Founding of Czechoslovakia: A Case of Support for an Emerging Sector
Industrial Policy in Relation to Automobile Production after the Founding of Czechoslovakia: A Case of Support for an Emerging Sector

Summary/Abstract: The economy of Czechoslovakia (CS) was traditionally strongly specialized in production and export of light consumer goods. Nevertheless, heavy industry was promoted by strongly protectionist trade policies in 1920s. As our empirical study shows, the CS automobile industry never become internationally competitive and heavy protectionist measures were a necessary condition for its existence. However, behind the protective wall the industry was able to develop production capacities, substitute imports of components, and even export to some extent to less demanding markets in Europe. The paper is therefore a contribution to the economic history research of development of such “strategic” industry in clear contradiction with comparative advantage and implications of economic theory. As such, It is another example of rejection of international division of labor which contributed (in long-term) to fundamental restructuring of national industrial structure.

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