The Role of Government Assistance in Structural Change in Manufacturing: Australian Evidence

By the 1970s the Australian manufacturing sector was, by OECD standards, small, fragmented and inward looking. Successive Australian Federal Governments have since responded by progressively reducing levels of assistance to manufacturing in an effort to promote structural change. In this article we investigate whether these lower levels of assistance have accelerated the pace of structural change by estimating an empirical model using a pooled cross-section time-series data set. Our results suggest that reduced levels of assistance to manufacturing have had a positive impact on the pace of structural change in the Australian manufacturing sector. In addition, we find that taxes on factor inputs can be expected to impede structural change, and it would appear that structural change proceeds at a faster pace in more specialised manufacturing sectors. Copyright 1993 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.