The Political Economy of Industrial Policy

30 Pages Posted: 28 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 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.

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Suggested Citation

Juhász, Réka and Lane, Nathaniel, The Political Economy of Industrial Policy (May 2024). NBER Working Paper No. w32507, Available at SSRN: https://ssrn.com/abstract=4843066

Réka Juhász (Contact Author)

University of British Columbia (UBC) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Nathaniel Lane

Nathaniel Lane ( email )

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

University of Oxford, Department of Economics ( email )

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

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Germany

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