Working Paper: NBER ID: w31538
Authors: Rka Juhsz; Nathan J. Lane; Dani Rodrik
Abstract: We discuss the considerable literature that has developed in recent years providing rigorous evidence on how industrial policies work. This literature is a significant improvement over the earlier generation of empirical work, which was largely correlational and marred by interpretational problems. On the whole, the recent crop of papers offers a more positive take on industrial policy. We review the standard rationales and critiques of industrial policy and provide a broad overview of new empirical approaches to measurement. We discuss how the recent literature, paying close attention to measurement, causal inference, and economic structure, is offering a nuanced and contextual understanding of the effects of industrial policy. We re-evaluate the East Asian experience with industrial policy in light of recent results. Finally, we conclude by reviewing how industrial policy is being reshaped by a new understanding of governance, a richer set of policy instruments beyond subsidies, and the reality of deindustrialization.
Keywords: No keywords provided
JEL Codes: L5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| industrial policy (O25) | structural change (L16) |
| industrial policy (O25) | economic growth (O49) |
| industrial policy (O25) | long-term effects on economic activity (F69) |
| targeting specific sectors (L52) | economic growth (O49) |
| industrial policy (O25) | resource shifting (Q20) |
| industrial policy (O25) | positive economic outcomes (D78) |
| certain industrial policies (O25) | structural change in Japan and South Korea (O14) |
| successful industrial policy (O25) | ability to let unsuccessful ventures fail (G33) |