Could Domestic Industrial Policies, Even With Global Fragmentation, Revive Productivity?

Many policymakers are using industrial policies more actively, while also pursuing policies tending to fragment global markets. Can this combination revive productivity growth? This essay starts with noting that an average productivity measure used to assess macroeconomic performance often masks important distributions of productivity outcomes, which matter economically, socially, and politically. It then reviews the frameworks that rationalize industrial policies and which derive the outcomes of global engagement. It then considers current empirical assessments of the effectiveness of industrial policies and current modeling work on the consequences of global fragmentation. It presents an overview of two new databases on detailed industrial policies as being deployed by policymakers. With regard to the question posed in the title, the answer is most surely ‘no’. First because the deployed industrial policies rarely match the framework rationalizations. Second because the majority of those policies further fragment global markets. Therefore, globalization gains are being foregone while industrial policies are being mistargeted. That combination is not likely to revive productivity growth nor improve productivity distributions.