OECD Science, Technology and Industry Policy Papers

The OECD Directorate for Science, Technology and Innovation (STI) develops evidence-based policy advice on the contribution of science, technology and industry to well-being and economic growth. STI Policy Papers cover a broad range of topics, including industry and globalisation, innovation and entrepreneurship, scientific R&D and emerging technologies. These reports are officially declassified by an OECD Committee.


An analysis of market-distorting factors in shipbuilding

The role of government interventions

This report analyses market-distorting factors in the shipbuilding industry with a focus on government interventions. This paper argues that government interventions in this cyclical industry do more harm than good by exacerbating and prolonging economic downturns through two channels. First, it promotes an over-ordering of vessels through lower delivery time, distorting ship buyers’ investment behaviour. Second, it may maintain unproductive capacity in the market that re-enters a new economic cycle, restarting the vicious circle of industrial excess capacity. Against the background of the global nature of this industry, these channels reinforce the case for effective international disciplines on government interventions. Overall, the mature nature of the shipbuilding industry undermines the need for an active industrial policy, beyond facilitating structural adjustment, and emphasizes the necessity for a horizontal policy approach. The work seeks to provide policy makers with a better understanding of how different factors can contribute to excess capacity.


Keywords: Government Support, Shipbuilding, Excess Capacity
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