The Oxford Handbook of Industrial Policy

Cover
The Oxford Handbook of Industrial Policy
Copyright
Acknowledgements
Contents
List of Figures
List of Tables
List of Contributors
Part I: Introduction
Chapter 1: Intoruction to Industrial Policy and Development
1.1 An Overview of Industrial Policy and Development
1.1.1 History and Debate in Industrial Policy
1.1.2 Evolving Challenges to Industrial Policy
1.1.3 The Shifting Terrain of Industrial Policy
1.1.4 Political Economy and Industrial Policy
1.1.5 The Cabinet of Policy Errors
1.2. Aims and Approaches of the Handbook
1.2.1 Aims and Approaches
1.2.2 Process
1.3 Organization and Structure
1.3.1 Part I: Introduction
1.3.2 Part II: Theoretical Perspectives
1.3.3 Part III: Context and Connections
1.3.4 Part IV: Experiences in Advanced Economies
1.3.5 Part V: Experiences in Emerging and Developing Countries
References
Chapter 2: The Theory and Practice of Industrial Policy
2.1 Introudction to the Theory and Practice of Industrial Policy
2.2 Theoretical Perspectives of Industrial Policy
2.2.1 The Concept of Industrial Policy
2.2.2 Structural Transformation and Industrial Policy
2.2.2.1 Perspectives on Structural Transformation
2.2.2.2 Manufacturing as an Engine of Growth and Structural Change
2.2.2.2.1 Linkages and Complementarities
2.2.2.3 The Strategic Role of Exports
2.2.2.4 Structural Transformation and its Implications for Industrial Policy
2.2.3 The Infant Industry Theory
2.3 Evolving Thinking on Industrial Policy: Technological Learning and Catch-up
2.3.1 Technical Change and Economic Development
2.3.2 Theoretical Underpinning of Catch-up and Late Development
2.3.3 Technological Learning and Industrial Policy
2.3.3.1 Technological Learning
2.3.3.2 Innovation Systems and Infrastructure
2.3.3.3 Implications for Technological Learning and Industrial Policy
2.4 The State and the Politics of Industrial Policy
2.4.1 The Dynamics of the State‒Market Mechanism
2.4.2 Politics and Political Economy
2.4.3 Disciplining the Private Sector and Reciprocity
2.4.4 Conflict and Political Stability
2.4.5 Myths Surrounding Industrial Policy
2.5 The Practice of Industrial Polciy: Dynamics, Adaptability, and Principles
2.5.1 Linkage Dynamics and Interdependence
2.5.2 Industrial Ecosystem and Cluster Dynamics
2.5.3 Tensions in Industrial Policy
2.5.3.1 Strategic Compatibility and Coherence
2.5.3.2 Synergy and Connections to Other Policies
2.5.3.3 Competitiveness and Discipline
2.5.4 Summary
2.6. Concluding Remarks: Observations and Emerging Issues
2.6.1 The Middle-income Trap
2.6.2 Changing Patterns of Global Production and World Economy
2.6.3 Accelerated Technological Advancement
2.6.4 Sustainability and Green Industrial Policy
Acknowledgements
References
Part II: Theoretical Perspectives
Chapter 3: Industrial Policy, Macroeconomics, and Structural Change
3.1. Introduction
3.2 Growth Patterns
3.3 The Dynamics of Production Structures
3.3.1 Innovations
3.3.2 Complementarities
3.3.3 The Interplay of Innovations and Complementarities
3.3.4 The Links between Productivity and Growth
3.4 Commodity Dependence
3.5 Macroeconomics, Finance, and Structural Change
3.6 Policy Implications
Acknowledgements
References
Chapter 4: Industrial Policies, Patterns of Learning, and Development: An
Evolutionary Perspective
4.1. Introduction
4.2 The Fundamental Properties of Technology
4.2.1 Technological Paradigms and Trajectories
4.2.2 Paradigms, Routines, Organizations
4.3 Technological Dominance, Micro-Heterogeneity, and Non-substitution
4.4 Some General Interpretative Implications
4.5 Structural Changes as a Fundamental Feature of Catching up
4.5.1 The Evolution of Technological Capabilitiesa nd Production Specializations
4.6 The Crucial Role of Industrial Polices
4.6.1 Emulation and, sometimes, Leapfrogging as a General Principle Inspiring Policies
4.6.2 The Complementarity between Technological Learning and the Development of Production Capacity
4.6.3 The Necessity of Nurturing Infant Industries
4.6.4 Industrial Policies in a Sino-centric World: Some Conclusions
4.7 Appendix: Shift-and-Share Decompoistion Methodology
Acknowledgements
References
Chapter 5: Neoclassical Economic Perspectives on Industrial Policy
5.1 Introduction
5.2 Theory of Domestic Distortions and the Policy Hierarchy
5.3 Structural Adjustment Era
5.4 Revival of Interest in Neoclassical Industrial Policy after 2000
5.5 New Structural Economics
5.6 Doomed to Choose: How to Implement Selectivity
5.7 Efficiency Indicators
5.8 Product Space
5.9 Dothese Calculations have any Role?
5.10 Conclusions
References
Chapter 6: Enterprises and Industrial Policy: Firm-based Perspectives
6.1 Introduction
6.2 Theory of the Firm and Enterprises in Industrial Development
6.2.1 Resource-based Theory of the Firm
6.3 Marret Power, Competition, and Enterprise Strategies
6.3.1 Competition and Productivity
6.3.2 Economic Power of Companies
6.3.3 Economic Power, Rents, and Political Settlement
6.4 Dimensions of the Internationalization of Production
6.5 Digitalization of Production, Enterprises, and Industrial Policy
6.5.1 Digitalization of Production
6.5.2 Digital Platforms
6.5.3 Industrial Policy Implications
6.6. Conclusion
References
Chapter 7: Radical Perspectives on Industrial Policy
7.1. Introduction
7.2 Radical Approaches to the Role of Manufacturing and Industrialization
7.2.1 Kaldorian and Structuralist Approaches: Manufacturing as a Special Engine of Growth
7.2.2 A Marxist Approach to Manufacturing and Industrialization
7.3 Marxism and Industrial Policy: Beyond Sectors and Developmen
7.3.1 Value, Exploitation, and Power in Capitalism
7.3.2 Industrial Policy: The Analytic and the Prescriptive
7.3.3 Climate Change: The Potential and Necessity of Radical Industrial Policy Today
7.4 Experiences of 'Radical' Industrial Policies
7.4.1 Statist Models of Industrialization
7.4.2 Labour-centred Industrial Development: Worker Co-operatives
7.4.3 Models of Industrial Policy with Participatory Planning
7.5 Conclusion
References
Part III: Context and Connections
Chapter 8: Global Value Chains and Regionally Coordinated Industrial Policy: The Case of ASEAN
8.1 Regional Economic Integration, The Core of ASEAN Industrial Policy
8.2 The Deepening of GVC Integraion: ASEAN, by Numbers
8.3. The Evolution of ASEAN Industrial Policy: From Import-substitution Industrialization to Export-oriented Industrialization to The Deepening of GVC Integraion
8.4 A Closer Look at ASEAN Industrial Policy in the Era of GVCs
8.4.1 Reshaping ASEAN Industrial Policy in the Era of GVCs: Towards a more Inclusive Participation
8.4.2 ASEAN Industrial Policy in GVCs: Success or Failure?
8.5 ASEAN's Regional Policy Coordination: The Case of the Auto Industry in Indonesia and Thailand
8.5.1 The GVC in the Automotive Industry
8.5.2 A Path to Development and Industrial Upgrading
8.5.3 ASEAN’s Regional Policy Coordination in the Automotive Industry
8.6 The Future Milestones in ASEAN Industrial Policy
References
Chapter 9: Managing Trade through Productive Integration: Industrial
Policy in an Interdependent World
9.1 Introduction
9.2 The Multifaceted Connections Between Trade Integration and Development
9.2.1 Gains from Trade?
9.2.2 Trade Composition, Structural Transformation, and Diversification
9.3 Productive Integration: The Emergence of Global Value Chains
9.3.1 Mapping GVCs
9.3.2 Assessing the Impact of GVCs
9.4 Managing Integration, Facing the Policy Challenges Ahead
9.4.1 Active versus Passive Policies
9.4.2 Upgrading and Sophistication
9.4.3 Regional Value Chains
9.5. Conclusion
References
Chapter 10: Greening Industrial Policy
10.1 Why Green Industrial Polciy?
10.2 General Features of the Greening of Industrial Policy
10.2.1 Energy
10.2.2 Materials/Resources
10.2.3 Finance
10.3 Effective Industrial Policy/Green Growth Initiatives in India and China
10.3.1 Green Industrial Policy in India and its Impact on Trade
10.3.2 Green Industrial Policy in China and its Impact on Trade
10.4 Opportunities for Late Latecomers to Apply Green Industrial Policies to Drive Development
10.5 Why Would any Country Wish to Continue with Fossil-Fuelled D evelopment?
10.6 Greening as Enhancing Energy and Resource Security: Working with the Differential Principle
10.7 Concluding Comments
References
Chapter 11: Globalization Narratives and Industrial Policy
11.1 The Approach Adopted in this Chapter
11.2 Theoretical Persectives
11.3 Hyper-Globalization and De-Globalization
11.4 Narratives in Action I: Globalization Indices
11. 5 Narratives in Action II: Three Storylines
11.5.1 Globalization as Inexorable yet Malleable
11.5.2 Regionalization as a Process that can Refract Global Neo-liberalism
11.5.3 Digital Industrialization: Distant Promise or Catalyst of Inequality?
11.6 Next Steps
11.7 Leveraging Storylines as Policy Space
Acknowledgements
References
Chapter 12: Grand Challenges, Industrial Policy, and Public Value
12.1 Introduction
12.2 From Marret Failure to Marret Shaping
12.3 Learning from History:The Evolution of Mission-oriented Policies
12.4 Instrumentalizing Missions as Industrial Policy
12.5 R: Routes and Directionality—A Mission-oriented Approach
12.6 O: Organizational Capabilities in the Public Sector
12.7 A: Assessment and Evaluation
12.8 R: Risks and Rewards
12.9 Conclusion
Acknowledgements
References
Chapter 13: The Political Economy of Development Banking
13.1 Introduction
13.2 The Economic Rationale for Development Banking
13.3 Lessons from Effective Development Banks
13.4 Diversification of Development Financing Matters for Industrial
Policy
13.5 Case Study: The Political Economy of Development Banking in Brazil
13.5.1 The Positive Side of Development Banking in Brazil
13.5.2 The Limitations of BNDES and the Importance of Broad Political Economy Factors
13.5.3 Policy Debates: Assessing the Role and Effectiveness of BNDES in Brazil
13.5.4 The Politics of Development Banking in Brazil
13.6 General Policy Considerations
References
Chapter 14: Technical Change, the Shifting ‘Terrain of the Industrial’,
and Digital Industrial Policy
14.1 Introduction
14.2 Technical Change and the Concepts of Sector: 'The What', 'The How', and 'The Where'
14.3 'Shifting Terrains': Technical Change and Digitalization within Industrial Ecosystems
14.4 Industrial Policy: Challenges and Opportunities in the New Digital Terrain
14.4.1 Technology Absorption, Deployment, and Technical Change: 'Capability Threshold'
14.4.2 Production System: Retrofitting and Integration
14.4.3 Infrastructure: Basic and Digital
14.4.4 Technology Diffusion: 4IR Islands and the Digital Capability Gap
14.4.5 Technology Access and Affordability: Endogenous Asymmetries
14.5 Conclusions
Acknowledgements
References
Chapter 15: An Industrial Policy Framework to Advance a Global Green
New Deal
15.1 Introduction
15.2 What is Clean Energy?
15.2.1 Natural Gas
15.2.2 Nuclear Energy
15.2.3 Geoengineering
15.2.4 Energy Efficiency and Clean Renewable Energy
15.2.5 Energy Efficiency
15.2.6 Estimating Costs of Efficiency Gains
15.2.7 Rebound Effects
15.2.8 Renewable Energy
15.2.9 Costs of Expanding Renewable Capacity
15.3 Economic Growth and Emissions Reductions
15.3.1 Global Model Framework and Calculations
15.4 Industrial and Financial Policies
15.4.1 Industrial Policies
15.4.2 Providing Cheap and Accessible Financing
15.4.3 Sources of Aggregate Funding
15.4.4 Channelling Financial Resources into Specific Investment Projects
15.5. Domestic Resource Capacities for Clean Energy Investiments
15.5.1 Fossil Fuel Consumption and Imports/Exports
15.6 Conclusion
17.7 Appendix
References
Chapter 16: Industrial Policy and Gender Inclusivity
16.1 Introduction
16.2 The Impact of Industrial Policy and Structural Change on Gender Equality
16.2.1 Gender, Employment, and Industrialization
16.3 Gender Equality Feedback Loops: Impact on Success of Industrial
Policies
16.3.1 Gender and Labour Productivity Growth
16.3.2 Gender and Knowledge Production
16.3.3 Gender, Diversity, and Technical Design
16.4 Conclusion
Acknowledgements
References
Chapter 17: Macro-Policy, Labour Markets, and Industrial Policy
17.1. Introduction
17.2 Setting the Stage: An Export-led Model of Economic Growth
172.1 Enter the Balance-of-Payments Constraint
17.3 'Big Push' Industrialization
17.3.1 The ‘Wage-Goods Inflation’ Barrier: A Ricardian–Kaleckian Mechanism
17.3.2 A Drop in Domestic Expenditure Growth: A Robinsonian Mechanism
17.3.3 Forced Savings, Restrictive Monetary Policy, and Destabilizing Austerity: Three Keynesian Mechanisms
17.4 Vicissitudes in the Life of Export-led Industrialization Strategies
17.4.1 The ‘Dutch Disease’
17.4.2 Escaping the Primary-Commodity Specialization Trap
17.5 Labour Laws as Instruments of Industrial Policy
17.5.1 Wages and Demand
17.5.2 ‘Technology-forcing’ Labour-Market Regulation
17.5.3 The Wage and the Profit Rate
17.6 Macro-Policy Lessons for Late I ndustrialization
References
Chapter 18: Technological Disruptions, GVCs, and Industrial Policy
18. 1 Introduction
18.2 Technological Change and the Fourth Industrial Revolution
18.3 GVCs and Manufacturing Hollowing Out
18.4 Signs of De - globalization
18.5 Industrial Policy and Beyond
18.6 Transformative Industrial Policy
18.7 Conclusions
Acknowledgements
References
Part IV: Experiences in Advanced Economies
Chapter 19: Industrial Policy: A Long-term Perspective and Overview
of Theoretical Arguments
19.1 New Perspectives on Cold War Economic Theory: Adam Smith, David Ricardo, and Paul Samuelson Revisited
19.2 The Historical Roots of Industrial Policy Theory
19. 3 The Key to Wealth as Urban Synergies Created by Adding Value to Raw Materials under a Large Division of Labour: Giovanni Botero (1589)
19.4 Increasing Returns: From Antonio Serra (1613) to Alfred Marshall (1890) and Paul Krugman (19181)
19.5 How Economic Activities Differ,
Learning Curves, and the Sequencing of Technological Change
19.6 On the 'Quality' of Economic Activities: Barriers to Entry, Hierarchies of Skills, and Dynamic Imperfect Competition
19.7 Colonialism and Industrial Policy
19.8 The Marshall Plan and the Need to Rediscover the Economics of Industry, Trade, and Population Density
19.9 'Institutions': A Failed Attempt to Reverse the Arrows of Causality of Economic Development
19.10 When Industrial Policy Intuition Clashes With Ricardian Trade Theory
19.11 Nichification:An 'Industrial' Policy Strategy for Agriculture
19.12 What's New in the Present Industrial Policy Game?
19.13 Conclusion: Unrealistic Utopias that Boomerang as the Curse of Europe and the West
References
Chapter 20: Post-war American Industrial Policy: Market Myths and
Production Realities
20.1 I Introduction To The Economics Of Production And Strategic Policy Frameworks
20.2 The US Second World War Production-informed Policy Framework
20.3 Post-War Policymaking Legacy
20.4 The Japanese Economic Miracle: Rival Technology Management Paradigms
20.5 Production System Legacies: The North versus the South
20.5.1 The Manufacturing Belt
20.5.2 The Sun Belt
20.5.3 The Gun Belt
20.5.4 The Rust Belt
20.6 Neo-Liberalism And Dismantling The 'American System'
20.7 The Capability Triad As Policy Framework
20.8 Appendix: Major Contributors To The Capability And Innovation Perspective
Acknowledgements
References
Chapter 21: European Industrial Policy: A Comparative Perspective
21.1 Introduction
21.2 Industrial Policy: Definition and Taxonomy
21.3 Industrialization and Industrial Policy
21.3.1 The United Kingdom
21.3.2 Germany
21.3.3 France
21.3.4 Italy
21.4 Industrial Policy from 1945 to the Twenty-first Century
21.4.1 Italy
21.4.2 France
21.4.3 The United Kingdom
21.4.4 Germany
21.4.5 Finland
21.4.6 Ireland
21.5 New Industrial Policy at the Turn of the Century
21.5.1 Germany
21.5.2 The United Kingdom
21.5.3 Italy
21.5.4 France
21.6 Conclusions
References
Chapter 22: The European Union’s Industrial Policy
22.1 Introduction
22.2 The Evolution of EU Industrial Policy in a Nutshell
22.2.1 The Interventionist Phase (1950-80)
22.2.2 The Liberal Phase (1980-2005)
22.2.3 The Pragmatic Phase (Since 2005)
22.3 EU Industrial Policy Priorities: The Numbers
22.3.1 The Level Dimension: Industrial Policy Spending at EU and Member-state Levels
22.3.2 The Thematic Dimension: Priorities in Industrial Policy
22.3.3 The Country Dimension: Substantial Differences in Industrial Policy Expenditure
22.4 EU Industrial Policy Efforts in Light of the Major Challenges Ahead
22.4.1 The Technological/Innovation Challenge
22.4.2 The Emerging Markets Challenge
22.4.3 The Cohesion Challenge
22.4.4 The Environmental Challenge
22.5 Conclusions
22.6 Appendix
22.6.1 Member States and Country Groupings
22.6.2 Selection of EU Budget Items and Assignment to Industrial Policy Themes
22.6.2.1 Mapping of budget items in the MFF 2014-20 to the industrial policy themes
22.6.2.2 Mapping of thematic objectives in the ESIF to the industrial policy themes
22.6.2.3 Assumption made for the co-financing by member states of ESIF projects
References
Chapter 23: Diverse Tools of Industrial Policy in Korea: A Schumpeterian
and Capability-based View
23.1 Introduction
23.2 Technology Licensing for Absorptive Capacity
23.3 Infant Industry Protection by Tariffs and Entry Control
23.4 Public-Private Joint R&D
23.5 Concluding Remarks
Acknowledgements
References
Part V: Experiences in Emerging and Deveoping Countries
Chapter 24: Industrial Policy and Industrialization in South East Asia
24.1 Introduction
24.2 Theoretical Considerations
24.3 Import-substitution Policies
24.3.1 Indonesia
24.3.2 Malaysia
24.3.3 The Philippines
24.3.4 Thailand
24.3.5 Summary
24.4 Export-oriented Policies
24.4.1 Indonesia
24.4.2 Malaysia
24.4.3 The Philippines
24.4.4 Singapore
24.4.5 Thailand
24.4.6 Summary
24. 5 Industrialization And De -Industrialization
24.5.1 Indonesia
24.5.2 Malaysia
24.5.3 The Philippines
24.5.4 Singapore
24.5.5 Thailand
24.5.6 Summary
24.6 Technological Upgrading Initiatives
24.6.1 Indonesia
24.6.2 Malaysia
24.6.3 The Philippines
24.6.4 Singapore
24.6.5 Thailand
24.6.6 Summary
24.7 Cconclusions
References
Chapter 25: National Champions, Reforms, and Industrial Policy in China
25.1 Introduction
25.2 Industrial Policy, Big Business, and China's Economic Reforms
25.2.1 The Mainstream Transition Economics View
25.2.2 The State Capitalism View
25.2.3 The Late Industrialization and Developmental State View
25.3 Industrial Policy and the Rise of China's National Champions
25.3.1 The Rise of China's National Champions in Industrial Sectors
25.3.2 The Rise of China's National Champions in Finance
25.4 State-Business Relations And The Governance Of China'S National Champions
25.4.1 Government Capability and Learning
25.4.2 Enterprise Capability and Learning
25.4.3 Networked Hierarchy, Institutional Bridging, and Reciprocal Control
25. 5 International Competitiveness of China's National Champions
25.6 Concluding Remarks
References
Chapter 26: Industrial Policies in the Brics
26.1 Introduction
26.2 The Tradition of Industrial Policy in the Brics
26.3 To Brics or not to Brics
26.3.1 From Bric to Brics
26.3.2 Brics to Build an Economic Block?
26.3.3 Industrial Policy Coordination
26.4 The Challenge of Heterogeneous Industrial Performances
26.4.1 Contribution to Global Economic Activity
26.4.2 Structural Change and Capability Accumulation
26.4.2.1 Productive Capabilities
26.4.2.2 Innovation Capabilities
26.4.3 Integration through Trade and Investment
26.5 Brics and the 4IR
26.5.1 Collective Responses
26.5.1.1 Building Basic Framework Conditions
26.5.1.2 Fostering Demand and Adoption of 4IR Technologies
26.5.1.3 Strengthening Skills and Research Capabilities
26.6 The International Dimension
26.6.1 Africa in Focus
26.7 Conclusions
Acknowledgements
References
Chapter 27: Successes and Failures of Industrial Policy in Transition Economies of Europe and Asia
27.1 Introduction: Industrial Policy and Economic Diversification
27.2 Overview of Changes in the Structure of Economies in Post-Communist Countries
27.3 Structural Economic Transformation and Industrial Policy
27.4 Industrial Policy: Which Industries to Support?
27.5 Industrial Policy: What Tools to Use?
27.6 Industrial Policy in Resource-rich Countries
27.7 Innovation, Research, and Development
27.8 State versus Private Sector, Government, Private, and Foreign Investment
27.9 International Trade and Trade Policy
27.9.1 Trade Liberalization
27.9.2 Import Substitution versus Export Orientation
27.10 Conclusion
References
Chapter 28: Latin American Industrial Policies: A Comparative Perspective
28.1 Introduction
28.2 Tacitness, Localized Technical Change, and Structural Inertia
28.2.1 The Dynamics of Learning and Industrial Policy
28.2.2 The Links between Macroeconomic and Industrial Policies
28.3 Policies in a Comparative Perspective: Industrial Policy in the Different Phases of Latin American Development
28.3.1 Industrial Policy: From State-led Industrialization to the Washington Consensus
28.3.2 From State-led Industrialization to the Debt Crisis
28.3.3 The Washington Consensus Years
28.3.4 The Timid Return of Industrial Policy in the 2000s
28.4 Korea as a Benchmark
28.5 Stylized Facts: A Comparative View on Productivity and Specialization in Latin America
28.5.1 Phases of Convergence and Divergence
28.5.2 Structural Change and Convergence
28.6 Concluding Remarks
Acknowledgements
References
Chapter 29: Phases and Uneven Experiences in African Industrial Policy
29.1 Introduction
29.2 Limited Progress with Structural Transformation in Sub-Saharan Africa
29.3 Theoretical Perspective: Using Industrial Policy to Escape the Learning Trap
29.4 Import-substitution Industrial Policy: The Cement Sector in Nigeria and Ethiopia
29.5 Industrial Policy in Labour-intensive Export Manufactures: Apparel Exports in Ethiopia
29.6 Leapfrogging Manufacturing? Knowledge-based Services in Kenya and Rwanda
29.7 Combining Export-oriented and Import-replacement Policies: Automobiles and Apparel in South Africa
29.8 Conclusion
References
Chapter 30: The Political Economy of Industrialization and Industrial Policy in Africa, 1960‒2018
30.1 Introduction
30.2 Colonial Industrial Policy: The Birth of Import-substitution Industrialization
30.3 Import-substitution Industrialization in Africa: The Early Post-colonial Experience
30.4 The Political and Economic Objectives of Import-substitution Industrialization in Africa
30.5 Industrial Policies for Import-substitution Industrialization
30.6 Industrial Performance Under Import-substitution Industrialization
30.7 Resources- and Needs-based Basic Industry Policy: An Alternative Strategy?
30.8 Liberalization and Industrial Policy
30.9 Renewed Potential for Second- and Third-Stage Import-substitution Industrialization?
30.10 Towards an African Developmental State and Effective Industrial Policy?
30.11 Conclusion
References
Index of Names
General Index