Industrial Policy for Development

This report asks a pivotal question: when should a country whose goal is economic development pursue industrial policy, and if so, how? It examines the economic rationales, prerequisite market conditions, and institutional capacity that underpin successful industrial policy implementation, distilling best practices where they exist. Specific industrial policies covered will include public goods like industry-tailored regulations, infrastructure, and skills (e.g., in agribusiness and tourism); market interventions like subsidies, import tariffs, local content requirements, and commodity export bans; and macroeconomic interventions like strategic exchange rate devaluations. Based on a review of national development plans from various countries, the report argues that policies targeting productivity growth in narrowly-defined industries can yield broader development benefits than strategies that focus only on economy-wide fundamentals. It also suggests that this targeted approach can be more valuable for low- and middle-income countries than for high-income countries.