The Who, What, When, and How of Industrial Policy: A Text-Based Approach

39 Pages Posted: 8 Sep 2022 Last revised: 1 Dec 2023

See all articles by Réka Juhász

Réka Juhász

University of British Columbia (UBC); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Nathan Lane

Nathaniel Lane; University of Oxford, Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Emily Oehlsen

University of Oxford

Verónica C. Pérez

Columbia University

Date Written: November 20, 2022

Abstract

Since the 18th century, policymakers have debated the merits of industrial policy (IP). Yet, economists lack basic facts about its use. This study sheds light on industrial policy by measuring and studying global policy practice for the first time. We first create an automated classification algorithm for categorizing industrial policy practice from text. We then apply it to a global database of commercial policy descriptions and quantify policy use at the country, industry, and year levels (2009-2020). These data allow us to study fundamental policy patterns across the world. We highlight four findings. First, IP is common (25% of policies in our database) and has expanded since 2010. Second, instead of blunt tariffs, IP is granular and technocratic. Countries tend to use subsidies and export promotion measures, often targeted at individual firms. Third, the countries engaged most in IP tend to be wealthier (top income quintile) liberal democracies. In our data, IP is rarer among the poorest nations (bottom quintile). Fourth, IP is targeted toward a subset of industries and is highly correlated with an industry’s revealed comparative advantage. We show that industrial policy is a prominent feature of the global economy and a far cry from industrial policies of the past.

Keywords: industrial policy, industrial development, supervised machine learning, targeting, text-as-data, natural language processing

JEL Classification: D72,O14,P16

Suggested Citation

Juhász, Réka and Lane, Nathaniel and Oehlsen, Emily and Pérez, Verónica C., The Who, What, When, and How of Industrial Policy: A Text-Based Approach (November 20, 2022). Available at SSRN: https://ssrn.com/abstract=4198209 or http://dx.doi.org/10.2139/ssrn.4198209

Réka Juhász (Contact Author)

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nathaniel Lane

Nathaniel Lane ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://https://www.economics.ox.ac.uk/people/nathaniel-lane#/

University of Oxford, Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Emily Oehlsen

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Verónica C. Pérez

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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