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The rejuvenation of industrial policy

Author

Listed:
  • Stiglitz, Joseph E.
  • Yifu, Justin
  • Monga, Celestin
Abstract
This essay is about an important area in which there has been major rethinking -- industrial policy, by which the authors mean government policies directed at affecting the economic structure of the economy. The standard argument was that markets were efficient, so there was no need for government to intervene either in the allocation of resources across sectors or in the choices of technique. And even if markets were not efficient, governments were not likely to improve matters. But the 2008-2009 global financial crisis showed that markets were not necessarily efficient and, indeed, there was a broad consensus that without strong government intervention -- which included providing lifelines to certain firms and certain industries -- the market economies of the United States and Europe may have collapsed. Today, the relevance and pertinence of industrial policies are acknowledged by mainstream economists and political leaders from all sides of the ideological spectrum. But what exactly is industrial policy? Why has it raised so much controversy and confusion? What is the compelling new rationale that seems to bring mainstream economists to acknowledge the crucial importance of industrial policy and revisit some of the fundamental assumptions of economic theory and economic development? How can industrial policy be designed to avoid the pitfalls of some of the seeming past failures and to emulate some of the past successes? What are the contours of the emerging consensus and remaining issues and open questions? The paper addresses these questions.

Suggested Citation

  • Stiglitz, Joseph E. & Yifu, Justin & Monga, Celestin, 2013. "The rejuvenation of industrial policy," Policy Research Working Paper Series 6628, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6628
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    References listed on IDEAS

    as
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    2. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," The World Bank Research Observer, World Bank, vol. 11(2), pages 151-177, August.
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    5. Noman, Akbar & Botchwey, Kwesi & Stein, Howard & Stiglitz, Joseph E. (ed.), 2011. "Good Growth and Governance in Africa: Rethinking Development Strategies," OUP Catalogue, Oxford University Press, number 9780199698578.
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    8. Bruce Greenwald & Joseph E. Stiglitz, 2013. "Industrial Policies, the Creation of a Learning Society, and Economic Development," International Economic Association Series, in: Joseph E. Stiglitz & Justin Yifu Lin (ed.), The Industrial Policy Revolution I, chapter 1, pages 43-71, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Stijepic, Denis, 2019. "On development paths minimizing the aggregate labor-reallocation costs in the three-sector framework and an application to structural policy," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203519, Verein für Socialpolitik / German Economic Association.
    2. M.A. Véganzonès-Varoudakis & H. T. M. Nguyen, 2018. "Investment climate, outward orientation and manufacturing firm productivity: new empirical evidence," Applied Economics, Taylor & Francis Journals, vol. 50(53), pages 5766-5794, November.
    3. Howell, Anthony, 2017. "Picking ‘winners' in China: Do subsidies matter for indigenous innovation and firm productivity?," China Economic Review, Elsevier, vol. 44(C), pages 154-165.
    4. Javier López González & Valentina Meliciani & Maria Savona, 2019. "When Linder meets Hirschman: inter-industry linkages and global value chains in business services," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(6), pages 1555-1586.
    5. Lingguo Xu & Peter E. Earl & D. S. Prasada Rao, 2019. "Materialism and Economic Progress," Discussion Papers Series 604, School of Economics, University of Queensland, Australia.
    6. Boeing, Philipp & Eberle, Jonathan & Howell, Anthony, 2022. "The impact of China's R&D subsidies on R&D investment, technological upgrading and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    7. Constantino Hevia & Norman V. Loayza & Claudia Meza-Cuadra, 2023. "Industrial Policies vs Public Goods under Asymmetric Information," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 46(91), pages 39-52.
    8. Stijepic, Denis, 2017. "On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy," MPRA Paper 77023, University Library of Munich, Germany, revised 22 Feb 2017.
    9. Kirsi Zongo & Mahamadou Diarra, 2022. "Exchange Rate Misalignments, Foreign Direct Investment and Industrial Performance in Sub-Saharan Africa [Désalignements du taux de change, investissements directs étrangers et performances industri," Working Papers hal-03649887, HAL.
    10. Shino Takayama & Yuki Tamura & Terence Yeo, 2019. "Primaries, Strategic Voters and Heterogenous Valences," Discussion Papers Series 605, School of Economics, University of Queensland, Australia.
    11. Maria Savona, 2018. "Industrial policy for a Europeanindustrial renaissance. A few reflections," SPRU Working Paper Series 2018-07, SPRU - Science Policy Research Unit, University of Sussex Business School.
    12. Michael Böheim, 2016. "Umweltpolitik als Kernelement einer systemischen Industriepolitik zur Förderung eines nachhaltigen Wirtschaftswachstums," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(1), pages 39-46, January.
    13. Martin Gornig & Claudia Kemfert, 2022. "Energiewende steht für die Chance auf Re-Industrialisierung, nicht für De-Industrialisierung [Energy Transition as an Opportunity for Re-Industrialisation]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(12), pages 933-935, December.
    14. Kushlin, Valery Ivanovich (Кушлин, Валерий Иванович) & Ustenko, V.S. (Устенко, В.С.), 2016. "Analysis of International Experience of Intensification of Scientific and Innovative Activity in the Modern Unstable Conditions [Анализ Международного Опыта Активизации Научно-Инновационной Деятель," Working Papers 2832, Russian Presidential Academy of National Economy and Public Administration.
    15. Ferrannini, Andrea & Barbieri, Elisa & Biggeri, Mario & Di Tommaso, Marco R., 2021. "Industrial policy for sustainable human development in the post-Covid19 era," World Development, Elsevier, vol. 137(C).
    16. Savona, María, 2016. "Global structural change and value chains in services: a reappraisal," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 43200.
    17. Anthony Howell, 2020. "Picking 'winners' in space: Impact of spatial targeting on firm performance in China," Journal of Regional Science, Wiley Blackwell, vol. 60(5), pages 1025-1046, November.
    18. Ondřej Dvouletý & Ivana Blažková, 2019. "The Impact of Public Grants on Firm-Level Productivity: Findings from the Czech Food Industry," Sustainability, MDPI, vol. 11(2), pages 1-24, January.
    19. Brautigam, Deborah & Weis, Toni & Tang, Xiaoyang, 2018. "Latent advantage, complex challenges: Industrial policy and Chinese linkages in Ethiopia's leather sector," China Economic Review, Elsevier, vol. 48(C), pages 158-169.
    20. Ashford, Nicholas A. & Hall, Ralph P., 2018. "Achieving Global Climate and Environmental Goals by Governmental Regulatory Targeting," Ecological Economics, Elsevier, vol. 152(C), pages 246-259.
    21. Rehfeld, Dieter & Terstriep, Judith, 2019. "Rückwärts in die Zukunft? Ein Essay zur jüngsten Debatte um Industriepolitik," Forschung Aktuell 04/2019, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.

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    Keywords

    Climate Change Economics; Public Sector Corruption&Anticorruption Measures; ICT Policy and Strategies; Achieving Shared Growth; Economic Theory&Research;
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