Phantom or Phoenix? Industrial Policies in Latin America Today

This book focuses on productive development policies (PDPs) that improve the economy’s aggregate productivity, be it directly through firms’ productivity or by facilitating a more productive allocation of factors of production. As defined by Melo and RodrÞguez-Clare (2006): “Productive development policies can be broadly defined as policies that aim to strengthen the productive structure of a particular national economy” This is evidently a very broad definition, including polices aimed at certain key markets or activities (such as research and development [R&D], exports, human-capital formation) in large sectors of the economy (manufacturing, agriculture) and in specific sectors (textiles, automobile industry, software production, etc.). Previous chapters reviewed a number of PDPs aimed at addressing failures in certain markets or economic activities; these are called “horizontal” PDPs, because they cut across economic sectors and clusters. This chapter covers “vertical” PDPs and is therefore concerned with policies directed to specific sectors and clusters. For short, vertical PDPs are termed industrial policies because they are PDPs specific to certain “industries,” which are taken to mean sectors or clusters of economic activity. Note that industrial policies refer to any set of related private producers, not just manufacturing.