The Political Economy of Industrial Policy

29 Pages Posted: 13 May 2024 Last revised: 23 May 2024

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)

Multiple version iconThere are 3 versions of this paper

Date Written: May 10, 2024

Abstract

We examine the ways in which political realities shape industrial policy through the lens of modern political economy. We consider two broad “governance constraints”: i) the political forces that shape how industrial policy is chosen and ii) the ways in which state capacity affects implementation. The framework of modern political economy suggests that government failure is not a necessary feature of industrial policy; rather, it is more likely to emerge when countries pursue industrial policies beyond their governance capacity constraints. As such, our political economy of industrial policy is not fatalist. Instead, it enables policymakers to constructively confront challenges.

Keywords: industrial policy, political economy, state capacity, embedded autonomy

JEL Classification: O25,L52,P00

Suggested Citation

Juhász, Réka and Lane, Nathaniel, The Political Economy of Industrial Policy (May 10, 2024). Available at SSRN: https://ssrn.com/abstract=4823810 or http://dx.doi.org/10.2139/ssrn.4823810

Réka Juhász

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 (Contact Author)

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

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