Pack, HowardSaggi, Kamal2013-12-192013-12-192006-07-22World Bank Research Observerdoi:10.1093/wbro/lkl001https://hdl.handle.net/10986/16393What are the underlying rationales for industrial policy? Does empirical evidence support the use of industrial policy for correcting market failures that plague the process of industrialization? This article addresses these questions through a critical survey of the analytical literature on industrial policy. It also reviews some recent industry successes and argues that public interventions have played only a limited role. Moreover, the recent ascendance and dominance of international production networks in the sectors in which developing countries once had considerable success implies a further limitation on the potential role of industrial policies as traditionally understood. Overall, there appears to be little empirical support for an activist government policy even though market failures exist that can, in principle, justify the use of industrial policy.en-USCC BY-NC-ND 3.0 IGOACCOUNTINGADVERSE EFFECTAGRICULTUREANALOGASYMMETRIC INFORMATIONAUTOMOBILEAUTOMOTIVEBANKING SECTORBARRIER TO ENTRYBARRIERS TO ENTRYBASICBUSINESS CLIMATEBUSINESSESBUYERCAPABILITIESCAPITAL FORMATIONCAPITAL MARKETCAPITAL MARKETSCATALYTIC ROLECELLULAR PHONESCITIESCODESCOLLABORATIONCOMMUNICATION TECHNOLOGYCOMPARATIVE ADVANTAGECOMPETITION POLICYCOMPETITIVE ADVANTAGECOMPETITIVE MARKETCOMPETITIVENESSCOMPONENTSCOMPUTER HARDWARECOMPUTER SCIENCECOMPUTER SOFTWARECOMPUTER SOFTWARE INDUSTRYCOMPUTER SYSTEMSCOMPUTER TECHNOLOGYCONSTANT RETURNS TO SCALECONSUMERSCOORDINATION FAILURECOORDINATION FAILURESCORPORATE TAX RATESCREDIBILITYDEVELOPING COUNTRIESDEVELOPMENT BANKDEVELOPMENT ECONOMICSDEVELOPMENT STRATEGIESDIMINISHING RETURNSDIRECTED CREDITDOMESTIC MARKETDYNAMIC ANALYSISE-MAILE-MAIL ADDRESSECONOMIC DEVELOPMENTECONOMIC POLICIESECONOMIC THEORYECONOMIES OF SCALEECONOMIES OF SCOPEELECTRONICSELECTRONICS INDUSTRYENTRY BARRIERENTRY BARRIERSEQUILIBRIUMEXPORTEREXPORTSEXTERNALITIESEXTERNALITYFINANCIAL CRISESFINANCIAL CRISISFINANCIAL SECTORFIXED COSTSFOREIGN COMPETITIONFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN MARKETSFORMAL ANALYSISFREE TRADEGLOBAL CAPITALGLOBAL CAPITAL MARKETSGLOBAL TRADEGLOBALIZATIONGOVERNMENT INTERVENTIONGOVERNMENT INTERVENTIONSGOVERNMENT POLICYGOVERNMENT SUBSIDIESGROSS DOMESTIC PRODUCTGROSS DOMESTIC PRODUCT GROWTHGROWTH MODELSGROWTH RATEHIGH TECHNOLOGYHOST COUNTRIESHOST COUNTRYHOST ECONOMYHUMAN CAPITALIMPLICIT TAXINCREASING RETURNSINCREASING RETURNS TO SCALEINDUSTRIAL DEVELOPMENTINDUSTRIALIZATIONINDUSTRY ASSOCIATIONINFANT INDUSTRY ARGUMENTINFORMATION ASYMMETRYINFORMATION EXCHANGEINFORMATION INDUSTRYINFORMATION TECHNOLOGYINFORMATIONAL ASYMMETRIESINNOVATIONINPUT­OUTPUTINSTITUTIONINSTRUMENTINTELLECTUAL PROPERTYINTENSIVE GROWTHINTEREST RATESINTERNATIONAL BANKINTERNATIONAL DEVELOPMENTINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL STANDARDSINTERNATIONAL TRADEINVENTIONSINVESTINGINVESTMENT CLIMATEINVESTMENT DECISIONSLDCSLEARNINGLOCAL MARKETMANUFACTURINGMARGINAL COSTSMARKET DISTORTIONSMARKET ECONOMYMARKET FAILUREMARKET FAILURESMARKETINGMONOPOLISTIC COMPETITIONMONOPOLYNATIONAL INCOMENETWORKINGNETWORKSNEW MARKETSNEW TECHNOLOGIESNEW TECHNOLOGYOLIGOPOLYOPEN ECONOMYOPPORTUNITY COSTOUTSOURCINGPERFECT COMPETITIONPHONESPOLITICAL ECONOMYPORTFOLIOPOSITIVE EXTERNALITIESPOSITIVE FEEDBACKPOTENTIAL INVESTORSPRIVATE SECTORPRODUCT CATEGORIESPRODUCTION COSTSPRODUCTION EFFICIENCYPRODUCTION FUNCTIONPRODUCTIVITYPRODUCTIVITY GROWTHPROFIT MARGINPROGRAMMINGPROPERTY RIGHTSR&DRAMRATE OF RETURNREAL TIMERENT SEEKINGRESULTRESULTSSANSATELLITESATELLITESSEARCHSETTLEMENTSETTLEMENT PROCEDURESILICONSOFTWARE DEVELOPMENTSOFTWARE ENGINEERINGSOFTWARE EXPORTSSOFTWARE INDUSTRYSOFTWARE PROGRAMMERSSTOCK MARKETSSUPPLY CHAINSSUPPLY NETWORKSTARGETSTAXTAX INCENTIVESTAX SUBSIDIESTECHNICAL INFRASTRUCTURETECHNICAL SKILLSTECHNICIANSTECHNOLOGICAL CHANGETECHNOLOGICAL LEARNINGTECHNOLOGY SPILLOVERSTECHNOLOGY TRANSFERTECHNOLOGY TRANSFERSTELECOMMUNICATIONTELECOMMUNICATION INFRASTRUCTURETELECOMMUNICATIONSTELECOMMUNICATIONS INFRASTRUCTURETELEPHONETELEPHONE LINESTELEVISIONSTIME PERIODTOTAL FACTOR PRODUCTIVITYTOTAL FACTOR PRODUCTIVITY GROWTHTRADE POLICYTRADE PROTECTIONTRADE REGIMESTRADINGTRADING SYSTEMTRANSMISSIONUNDERLYING PROBLEMUSER INTERFACEUSESVERTICAL INTEGRATIONWAGESWELFARE ECONOMICSWORLD TRADE ORGANIZATIONWTOY2KY2K PROBLEMJournal ArticleWorld Bank10.1596/16393