Industrial policy

Industrial policy is defined as the strategic effort by the state to encourage the development and growth of a sector of the economy. It refers to “any type of selective intervention or government policy that attempts to alter the structure of production toward sectors that are expected to offer better prospects for economic growth than would occur in the absence of such intervention” (Pack and Saggi, 2006) .

Contents

At a glance: Short reads on Industrial Policy

Watch a two-minute introductory video on Industrial Policy in the 21st Century by UNU-WIDER below.

Synthesis Note: Industrial Policy, DCED, 2017. This note summarises current key issues and debates in Industrial Policy. Key take-aways include
- Some argue that Industrial Policy is the only one to deliver real growth; others that it has almost never worked. Sometimes, the same evidence is cited in support of both arguments.
- There is an ongoing debate over which, if any, sectors Industrial Policy should target. Not all industries are equally useful for development; some can be good for mass employment, but allow little technological learning.
- Industrial Policy is a relatively demanding approach. To be effective, its design and implementation needs to take into account both a government’s capabilities and political will.

DCED publications

Supporting Sector-Focused Business Environment Reform in Developing Countries, 2015: This Paper aims to better understand how agencies are supporting business environment reforms in specific industry sectors: Pharmaceuticals, Renewable Energy, Mining Sector (and small-scale suppliers), and Horticulture.
Strategic Industrial Policy and Business Environment Reform: Are they Compatible? DCED, 2013 – This paper addresses the compatibility of business environment reform and industrial policy approaches, and makes recommendations to donors on how industrial policy can be applied. The paper draws on examples from four countries.
How BER can be complemented with industrial policy support, DCED 2013:
This Annex to the Practical Guidance on Supporting Business Environment Reform (BER) focuses on how BER can be complemented through industrial policy support.

Background documents: structural transformation

The rise of the robot reserve army: automation and the future of economic development, work, and wages in developing countries, Center for Global Development, 2018. This paper surveys the literature on automation and looks at the consequences for employment in development countries. It determines that automation will probably lead to wage stagnation but not to mass unemployment, at least in the short-term.
Digitalisation and the Future of Manufacturing in Africa, SET/ODI, 2018. Examines how a growing digital economy affects developing countries’ manufacturing labour productivity. A key message of this paper is that governments need to better prepare for the digital future.
DFID Innovation and Growth, Tilburg University, 2017. This research portal gives access to 37 research reports on innovation in developing countries, focusing on policy and research issues.
The Changing Structure of Africa’s Economies, World Bank, 2017. Describes recent shifts in employment in African economies. Much of Africa’s recent growth and poverty reduction has coincided with a decline in the share of the labour force engaged in agriculture.
Industrial Competitiveness and Jobs. An Evaluation of World Bank Group Industry-Specific Support to Promote Industrial Competitiveness and Its Implications for Jobs, IEG, 2016. This evaluation focuses on the World Bank Group’s support to enhancing industry-specific productivity and competitiveness, and examines the implications of improved industry competitiveness for employment during the last decade.

For and against Industrial Policy in developing countries

The Entrepreneurial State: Debunking Public vs. Private Sector Myths, Mariana Mazzucato, 2018. Argues that the state has not only fixed market failures, but has also shaped and created markets, paving the way for new technologies and sectors that the private sector only ventures into once the initial risk has been assumed.
Strategic industrial policy and business environment reform: are they compatible?, DCED Working Paper, 2013.
Should industrial policy in developing countries conform to comparative advantage or defy it? A debate between Justin Lin and Ha-Joon Chang, 2009.

Industrial policy

At a glance: Short reads on Industrial Policy

DCED publications

Background documents: structural transformation

For and against Industrial Policy in developing countries

“How to” of Industrial Policy

Industrial Policy experience from various countries

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