Discussion paper

DP18405 The New Economics of Industrial Policy

We discuss the considerable literature that has developed in recent years providing rigorous evidence on how industrial policies work. This literature is a significant improvement over the earlier generation of empirical work, which was largely correlational and marred by interpretational problems. On the whole, the recent crop of papers offers a more positive take on industrial policy. We review the standard rationales and critiques of industrial policy and provide a broad overview of new empirical approaches to measurement. We discuss how the recent literature, paying close attention to measurement, causal inference, and economic structure, is offering a nuanced and contextual understanding of the effects of industrial policy. We re-evaluate the East Asian experience with industrial policy in light of recent results. Finally, we conclude by reviewing how industrial policy is being reshaped by a new understanding of governance, a richer set of policy instruments beyond subsidies, and the reality of de-industrialization.


Juhász, R, N Lane and D Rodrik (2023), ‘DP18405 The New Economics of Industrial Policy‘, CEPR Discussion Paper No. 18405. CEPR Press, Paris & London. https://cepr.org/publications/dp18405