Production Network Features of Industrial Policy

Vanya Georgieva

No 2025/023, IMF Working Papers from International Monetary Fund

Abstract: Industrial policy has gained popularity in recent years and across all regions and income levels. Consequently, it is increasingly important to understand how governments choose the sectors they target. This analysis explores the role of domestic production networks in sector targeting, while controlling for other sector and global value chain characteristics. Combining datasets on industrial policy (Global Trade Alert) and input-output linkages (ICIO, OECD) provides novel insight into the network features of industrial policy. In particular, a sector’s ‘centrality’—i.e., its degree of connectedness - within the domestic production network is an important and significant predictor of sector intervention. The results indicate that industrial policy is used differently across regions, income groups, time periods, and types of policy tools. Notably, emerging economies tend to target more central sectors, while advanced economies target less central ones, on average. However, there has been a global shift toward more central sectors over time. Lastly, subsidies are deployed on more central sectors, while tariffs are used on less central ones.

Keywords: Industrial Policy; Trade Policy; Subsidies; Global Value Chains; Production Networks; Spillovers; production network feature; input-output linkage; sector intervention; advanced economy; import tariff result; country-sector control variables; standard deviation; Exports; Income; Export restrictions; Emerging and frontier financial markets; Global; Asia and Pacific; Europe; Middle East and Central Asia (search for similar items in EconPapers)
Pages: 65
Date: 2025-01-17
New Economics Papers: this item is included in nep-ino, nep-int, nep-net and nep-tid
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