Dani Rodrik on Industrial Policies

From a new VoxDev post by Dani Rodrik:

“A new generation of work has been moving us beyond the largely ideological debates of the past to a more contextual, pragmatic understanding. The most recent strand is rooted in two developments. One of these is the indisputable economic success of China, a country that has made liberal use of a diverse array of industrial policies: cheap loans, public ownership, local-content requirements, export subsidies, and technology-transfer requirements. The other is the dissatisfaction with Washington Consensus-type policies, which in Latin America and elsewhere produced weak returns in terms of structural change and productive diversification.

The Inter-American Development Bank has been at the forefront of the new pragmatic approach, producing a series of case studies of successful and less successful interventions in Latin America. These studies analyse in some detail the nature of public-sector engagement with the private sector in a range of tradable industries (Sabel et al. 2012, IDB 2014, Fernández-Arias et al. 2016). One important difference from the earlier tradition of case studies is that these pay much greater attention to methodological issues and the problems of causal inference. Consequently, they are duly careful about the conclusions that can be drawn. Nevertheless, they provide considerable insight about appropriate institutional frameworks.

These studies build on existing works emphasising the role of disciplined public-private collaboration as a “search engine” for identifying the most important constraints faced by entrepreneurs, as well as the most appropriate mechanisms for alleviating such constraints (Hidalgo et al. 2007, Hausmann et al. 2005, Rodrik 2007, 2008, Sabel 2007). When designed appropriately, public–private collaboration can ameliorate both of the risks identified above: lack of information and political capture. Their work draws on the experience of successful practitioners (e.g. Ghezzi 2017), while informing them in turn.”

Continue reading here.

Posted by at 10:41 AM

Labels: Inclusive Growth


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