Is There a Case for Industrial Policy? A Critical Survey

By Howard Pack, Kamal Saggi. 2006

512 citations recorded by the source corpus.

What are the underlying rationales for industrial policy? Does empirical evidence support the use of industrial policy for correcting market failures that plague the process of industrialization? This article addresses these questions through a critical survey of the analytical literature on industrial policy. It also reviews some recent industry successes and argues that public interventions have played only a limited role. Moreover, the recent ascendance and dominance of international production networks in the sectors in which developing countries once had considerable success implies a further limitation on the potential role of industrial policies as traditionally understood. Overall, there appears to be little empirical support for an activist government policy even though market failures exist that can, in principle, justify the use of industrial policy.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/82f32fa98daec7b4953fbe48fbaf2b1c570f9ee8

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Citations in the corpus

Growth and the Quality of Foreign Direct Investment: Is All FDI Equal? (2007, methodology): “31 For a survey on industrial promotion practices see Pack and Saggi (2006).”
Green product development: What does the country product space imply? (2018, background): “Previous studies show in fact that policy measures might not be equally effective for all green sectors in every country (Eickelpasch and Fritsch, 2005; Pack and Saggi, 2006; Huberty and Zachmann, 2011).”
Leviathan as a Minority Shareholder: Firm-Level Implications of State Equity Purchases (2013, background): “If, as critics of industrial policy contend, governments frequently “pick winners” (e.g., Pack & Saggi, 2006), the apparent positive effect of stakes may be spurious; that is, BNDES may be selecting high performers instead of increasing the performance of the firms in which it invests.”
New Varieties of State Capitalism: Strategic and Governance Implications (2015, background): “In addition, although firms are encouraged by the state to pursue riskier projects with high social externalities, entrepreneurs will essentially seek to make a profit given the incentive structure by the state policies in place (Cimoli, Dosi, Nelson, & Stiglitz, 2009; Pack & Saggi, 2006).”
Strategizing by the government: Can industrial policy create firm‐level competitive advantage? (2015, background): “For this reason, critics of IP usually refrain from attacking horizontal policies and instead center their arguments on the potential distortions caused by vertical targeting (e.g., Pack and Saggi, 2006).”
Beating Competitors to International Markets: The Value of Geographically Balanced Networks for Innovation (2014, background): “While some proponents advocate the role of integrating foreign firms into the production network to leverage their strengths and resources (Coe, Dicken, and Hess, 2008; Pack and Saggi, 2006; Thun, 2004), others clearly argue for the collaboration with proximate firms to create local competitiveness ”
Undervaluation through foreign reserve accumulation: Static losses, dynamic gains (2010, background): “contrast, focuses on the capital accumulation process: higher savings rates in an endogenous growth environment in the style of Romer (1986) translate into higher growth.”
Industrial Policy: Don’t Ask Why, Ask How (2009, unknown): “Pack and Saggi (2006), for example, provide a detailed list of informational requirements intended to suggest the impossibility of industrial policy.”
Industrial Policy: Can We Go Beyond an Unproductive Confrontation? (2010, unknown): “Of course, as Pack and Saggi (2006) points out, it is impossible to definitely prove”