Back in Business: Industrial Policy for Emerging Economies in the New Globalization | Asian Development Bank

Back in Business: Industrial Policy for Emerging Economies in the New Globalization

Publication | February 2018
Back in Business: Industrial Policy for Emerging Economies in the New Globalization

This paper explores the potential roles of industrial policy in the transition from middle-income to high-income status, and the actual experience of industrial policy in emerging economies.

Today’s emerging economies face a dual structural transformation challenge: (i) to move closer to the current world technology frontier (traditional catch-up), and (ii) to adjust to technological change in advanced economies and increasingly binding environmental and social constraints. They must do so subject to their available state capacity. The paradox of industrial policy is that it is most straightforward when state capacity is the most constrained. In this paper, the authors suggest that emerging economies still should explore sector-based horizontal policies addressing market and state failures in individual industries.

Contents 

  • Introduction
  • Neo-Schumpeterian Industrial Policy and The Middle-Income Trap
  • State Capacity and Specific Industrial Policies
  • Risks to Industrial Policy in Emerging Economies
  • Risk Mitigation through Openness and Outside Anchoring
  • Two Sector Examples of Modern Industry Policy in Emerging Economies
  • Conclusions