The Political Economy of Industrial Policy

2024/11/01 by Réka Juhász, Nathaniel Lane · 1 voice · 5 citations
Economics, Econometrics and Finance · #Economic Theory and Policy

paper · pdf · doi:10.1257/jep.38.4.27

openalex publication_date 2024/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/16

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”: (1) the political forces that shape how industrial policy is chosen and (2) 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 fail 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.

Citations

• The Quarterly Journal of Economics

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Discussions

• Countries increasingly implement measures to expand their manufacturing capacities for clean technologies. Industrialized countries currently have almost 4,500 green industrial policies in place. Sinc [bsky, 0 points, 1 comments]