Development and Modern Industrial Policy in Practice

Development and Modern Industrial Policy in Practice

Issues and Country Experiences

Edited by Jesus Felipe

Development and Modern Industrial Policy in Practice provides an up-to-date analysis of industrial policy. Modern industrial policy refers to the set of actions and strategies used to favor the more dynamic sectors of the economy. A key aspect of modern industrial policy is embedding private initiative in a framework of public action to encourage diversification, upgrading, and technological dynamism to achieve development in the twenty-first century. The book reviews key questions that policymakers ask about industrial policy, such as: who selects sectors; what is the rationale for sector selection; what are the main tools to promote sectors; what is the role of human capital; and what are the mechanisms for monitoring and evaluation? Expert contributors discuss how to undertake industrial policy effectively and examine the experiences of Australia, the EU, the Republic of Korea, Malaysia, and the US.

Chapter 5: Industrial policy design and implementation challenges

Mushtaq H. Khan

Subjects: economics and finance, industrial economics, industrial organisation, politics and public policy, public policy, social policy and sociology, labour policy


The design of industrial policies depends on three interrelated issues. First, industrial policy can be designed to address very different economic and social objectives in different countries. However, clarity about objectives and priorities is important to avoid addressing contradictory objectives with the same policy. Second, the design of industrial policy depends on identifying the constraints and contracting failures that may be preventing the achievement of particular objectives. Third, appropriate policy design depends on initial institutional and political conditions, since all instruments may not be equally effective in different contexts, and success requires selecting instruments that are most likely to be effective in specific country contexts.

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