Industrial Policies: Handle with Care

This Staff Discussion Note (SDN) leverages various databases spanning many countries and sectors, to study the drivers of IPs and assess how they interact with the performance of targeted sectors relative to non-targeted ones.

Volume/Issue: Volume 2025 Issue 002

Publication date: March 2025

ISBN: 9798229000642

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Economics- Macroeconomics , Industrial Policies , Economic Performance , Externalities , Spillovers , Policy consideration , drivers of IPs , ips target , correlates of IPs , protectionist IPS , trading partner , value chain , Export subsidies , Structural policies , Structural reforms , Total factor productivity , Global , East Asia

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Summary

Industrial policies (IPs) are increasingly implemented, necessitating a reassessment of their benefits and costs. This study examines their economic and geopolitical drivers and their impact on targeted sectors. While IPs yield moderate and uneven economic gains, they are more effective when addressing highly-distorted upstream sectors with suitable tools. Structural reforms generally offer greater benefits and strengthen the link between IPs and economic performance. However, IPs may lead to significant fiscal costs and unintended spillovers, potentially accelerating economic fragmentation. Therefore, careful management of IPs is crucial.