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Rethinking the Political Economy of Industrial Policy

Sonia N. Aggarwal and Vinod K. Aggarwal

L'industria, 2023, issue 4, 583-626

Abstract: Industrial policy has long been used by developing countries to promote industries through broad import substitution industrialization efforts. Much of this effort has been criticized as leading to inefficient and uncompetitive firms. Recent work on new industrial policy, however, particularly in the context of the rise of China, has emphasized the importance of knowledge spillovers, green industrial efforts, global value chains, and the entrepreneurial state as key elements for success. Following a review of the rationale for state intervention, this article focuses primarily on the role of political factors that influence the effectiveness of industrial policy. Specifically, we identify key international drivers and constraints, domestic state-society relations, and elite ideological commitments to evaluate the likelihood of conducting successful industrial policy.

Keywords: Industrial Policy; Political Economy; Entrepreneurial State; Protectionism; Global Value Chains (search for similar items in EconPapers)
Date: 2023
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