Depending on the outcome of negotiations, Brexit potentially changes the rules that govern the use of industrial policy. The UK government has in mind risky policy reforms that appear to be incompatible with EU rules on state aid. This column argues that this is an unheralded downside of a hard Brexit.
Nicholas Crafts, 18 April 2017
Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 20 February 2017
A majority of UK-based macroeconomists welcome the government’s new industrial strategy, but doubt that the government can deliver. This column, which presents the results of the latest Centre for Macroeconomics and CEPR survey, shows a large majority of economist think that the UK needs a new regional strategy to tackle inequality across different parts of the country.
Diego Daruich, William Easterly, Ariell Reshef, 16 January 2017
National trade policies have been at the heart of recent policy debates, with many calls for industrial policies to help pick winners. This column shows that while a few export goods account for the bulk of export value within each country, hyper-specialisations are very unstable, making it unlikely that industrial policy will work even in the medium run. The best policy to promote exports would be just to let entrepreneurs exploit new opportunities as they arise.
Ramon Xifré, 12 September 2014
As the most acute phase of the Eurozone crisis is over, the current-account balances of France, Italy, and Spain have improved. This column warns against complacency about this improvement, pointing at some structural factors that impede growth and damage competitiveness. Resources should be relocated towards the tradeable sectors and to those firms most prepared to grow and compete. If not, these three countries are likely to aggravate the dysfunctional duality of their economies.
Gary Gereffi , Xubei Luo, 14 June 2014
The explosion of trade in intermediate goods has created new development opportunities, but many of the jobs at the bottom of global value chains are low-paid, insecure, and dangerous. This column argues that participation in global value chains brings risks as well as opportunities. The gains from ‘moving up the global value chain’ are not equally distributed – large, professional, high-tech firms with diversified export markets, and high-skilled workers with formalised contracts benefit the most.
Demián Dalle, Verónica Fossati, Federico Lavopa, 13 April 2014
Discussions of global value chains (GVCs) have permeated international organisations’ research and policy agendas. This column presents a critical view on some of the recent policy recommendations that urge for as much liberalisation of trade in goods and services as possible. These proposals cannot be automatically applied to developing countries without some type of government intervention.
Kozo Kiyota, Tetsuji Okazaki, 06 January 2014
The presumed success of Japanese post-war industrial policy has been used to advocate similar policies in other countries. Key to such arguments then is the empirical demonstration of the policies’ effects. This column presents research making use of a novel dataset that allows controlling for industry heterogeneity across many disaggregated industries. The effects of the quota removal on productivity were significantly positive, while the effects of tariffs on labour productivity were insignificant.
David Greenaway, 16 June 2012
The defiant attitude that no crisis should go to waste has understandably become more popular in recent years. This column argues that the on-going financial crises provide an important incentive for new thinking on government competitiveness and industrial policy, particularly for what to do when the crises end.
Karl Aiginger, 03 October 2011
More and more policymakers are talking about stimulating innovation in order to reinvigorate their economies. But how can this be achieved? This column evaluates current industrial policy in France.
Dani Rodrik, 18 March 2011
Dani Rodrik of the Harvard Kennedy School talks to Viv Davies about ‘growth-reducing structural change’, the puzzling phenomenon whereby labour moves from high- to low-productivity activities. They also discuss the role of industrial policy in growth strategies, global imbalances and the use of currency policy, climate change and the importance of education and migration for growth. The interview was recorded in Washington DC in March 2011 at the IMF conference, ‘Macro and Growth Policies in the Wake of the Crisis’. [Also read the transcript.]
Holger Görg, Aoife Hanley, Eric Strobl, 05 October 2010
A chief concern for countries aiming to attract investment is how it will trickle down to the local economy. This column presents evidence on the effect of government grants to foreign companies investing in Ireland between 1983 and 2002. It finds that the grants had little effect on generating supply links with local firms and argues that governments should instead work towards reducing partner search costs.
Jesus Felipe, Utsav Kumar, Arnelyn Abdon, 26 August 2010
Why have China and India been able to grow so quickly? This column argues that while the industrial policies pursued by both countries up until the 1980s led to gross mistakes and inefficiencies, China and India would not be where they are now without them. Their export baskets are far more sophisticated and diversified than expected given their income per capita.
Ann Harrison, Andres Rodríguez-Clare, 27 June 2010
Does industrial policy – policies to encourage exports, attract foreign direct investment, promote innovation, and pick winners – work? This column recommends developing countries pursue “soft” industrial policies, which aim to develop a process whereby government, industry, and cluster-level private organisations can collaborate on interventions that can directly increase productivity.
Gilbert Metcalf, 27 June 2009
Nearly all economists agree that the most efficient way to address environmental problems is to raise the cost of the pollution-generating activity, but US policies subsidise clean-energy alternatives instead. This column criticizes that approach – subsidies lower the cost of energy, play favourites with technologies, are often inframarginal, and frequently interact in unexpected ways with other policies.