Growth or stability? Using social risk preferences to guide industrial policy

Andras Bethlendi and Christopher Stapenhurst

Journal of Economic Policy Reform, 2025, vol. 28, issue 3, 263-280

Abstract: Previous studies use portfolio theory to identify industrial policies that efficiently trade-off economic growth and stability. We incorporate social risk preferences to identify a unique optimal policy, and develop a new “ceteris paribus” policy simulation to select between different, possibly inefficient, polices. Using Hungarian data, we find that expanding the highest growth sectors is optimal for all plausible levels of risk aversion. If the society is relatively risk averse, then expanding some medium growth sectors is optimal too.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jpolrf:v:28:y:2025:i:3:p:263-280

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DOI: 10.1080/17487870.2025.2474050

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