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The rejuvenation of industrial policy

Author

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  • Stiglitz, Joseph E.
  • Yifu, Justin
  • Monga, Celestin

Abstract

This essay is about an important area in which there has been major rethinking -- industrial policy, by which the authors mean government policies directed at affecting the economic structure of the economy. The standard argument was that markets were efficient, so there was no need for government to intervene either in the allocation of resources across sectors or in the choices of technique. And even if markets were not efficient, governments were not likely to improve matters. But the 2008-2009 global financial crisis showed that markets were not necessarily efficient and, indeed, there was a broad consensus that without strong government intervention -- which included providing lifelines to certain firms and certain industries -- the market economies of the United States and Europe may have collapsed. Today, the relevance and pertinence of industrial policies are acknowledged by mainstream economists and political leaders from all sides of the ideological spectrum. But what exactly is industrial policy? Why has it raised so much controversy and confusion? What is the compelling new rationale that seems to bring mainstream economists to acknowledge the crucial importance of industrial policy and revisit some of the fundamental assumptions of economic theory and economic development? How can industrial policy be designed to avoid the pitfalls of some of the seeming past failures and to emulate some of the past successes? What are the contours of the emerging consensus and remaining issues and open questions? The paper addresses these questions.

Suggested Citation

  • Stiglitz, Joseph E. & Yifu, Justin & Monga, Celestin, 2013. "The rejuvenation of industrial policy," Policy Research Working Paper Series 6628, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6628
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," World Bank Research Observer, World Bank Group, vol. 11(2), pages 151-177, August.
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    Cited by:

    1. repec:eee:chieco:v:44:y:2017:i:c:p:154-165 is not listed on IDEAS
    2. Stijepic, Denis, 2017. "On development paths minimizing the structural change costs in the three-sector framework and an application to structural policy," MPRA Paper 77023, University Library of Munich, Germany, revised 22 Feb 2017.
    3. Maria Savona, 2018. "Industrial policy for a Europeanindustrial renaissance. A few reflections," SPRU Working Paper Series 2018-07, SPRU - Science and Technology Policy Research, University of Sussex.
    4. Michael Böheim, 2016. "Environmental Policy as a Core Element of Systemic Industrial Policy to Encourage Sustainable Economic Growth," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(1), pages 39-46, January.

    More about this item

    Keywords

    Climate Change Economics; Public Sector Corruption&Anticorruption Measures; ICT Policy and Strategies; Achieving Shared Growth; Economic Theory&Research;

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