Infant-Industry Theory

AAA

DEFINITION of 'Infant-Industry Theory'

The supposition that emerging domestic industries need protection against international competition until they become mature and stable. In economics, an infant industry is one that is new and in its early stages of development, and not yet capable of competing against established industry competitors.

INVESTOPEDIA EXPLAINS 'Infant-Industry Theory'

Infant-industry theorists argue that industries in developing sectors of the economy need to be protected to keep international competitors from damaging or destroying the domestic infant industry. In response to these arguments, governments may enact import duties, tariffs, quotas and exchange rate controls to prevent international competitors from matching or beating the prices of an infant industry, thereby giving the infant industry time to develop and stabilize.


Infant-industry theory holds that once the emerging industry is stable enough to compete internationally, any protective measures introduced, such as tariffs, are intended to be removed. In practice, this is not always the case because the various protections that were imposed may be difficult to remove.

RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Sunrise Industry

    A colloquial term for a sector or business that is in its infancy, ...
  3. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. ...
  4. Import

    A good or service brought into one country from another. Along ...
  5. Net Exports

    The value of a country's total exports minus the value of its ...
  6. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
Related Articles
  1. Industry Handbook
    Investing Basics

    Industry Handbook

  2. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  3. What Is An Emerging Market Economy?
    Economics

    What Is An Emerging Market Economy?

  4. What is Globalization?
    Investing

    What is Globalization?

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center