Industrial Policies: Handle with Care

Sandra Baquie, Yueling Huang, Florence Jaumotte, Jaden Kim, Rafael Machado Parente and Samuel Pienknagura

No 2025/002, IMF Staff Discussion Notes from International Monetary Fund

Abstract: 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.

Keywords: 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 (search for similar items in EconPapers)
Pages: 31
Date: 2025-03-21
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