Industrial Policy and Economic Development
Summary
Industrial policy encompasses a suite of government measures aimed at shaping the structure and performance of national economies by supporting specific sectors, firms or technologies. Historically, it has ranged from classical tariffs and import-substitution in the nineteenth and early twentieth centuries to the “developmental state” models of East Asia in the post-war era. In recent decades, debates have centred on the balance between market-based mechanisms and state-led coordination to correct market and coordination failures, to foster structural transformation and to enhance productivity. Industrial policy can accelerate technological upgrading, diversify the economic base and stimulate total factor productivity through targeted subsidies, infrastructure investment, skills development and innovation incentives. Its success depends critically on government capacity, institutional quality and transparent governance. In an era of digitalisation, climate imperatives and geopolitical tensions, industrial policy has regained prominence as a tool to build resilience, promote green industries and navigate global value-chain shifts.
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Industrial Policy and Economic Development publication trend
The graph below shows the total number of articles in industrial policy and economic development across all publications each year (not limited to Nature Index journals).
Technical terms
Industrial policy: A set of public interventions targeted at promoting specific sectors, firms or technologies to achieve structural economic objectives.
Market failure: A situation in which unregulated markets deliver suboptimal outcomes, justifying corrective policy measures.
Subsidy: A financial contribution by government to lower production costs, encourage investment or support emerging industries.
Total factor productivity (TFP): A measure of efficiency capturing output growth not explained by inputs of labour and capital.
References
- The Political Economy of Industrial Policy. Journal of Economic Perspectives (2024).
- The return of industrial policy in data. World Economy (2024).
- Everything Everywhere All At Once: competition policy and industrial policy choices in an era of structural change. Oxford Review of Economic Policy (2024).
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