1887

OECD Science, Technology and Industry Policy Papers

The OECD Directorate for Science, Technology and Innovation (STI) develops evidence-based policy advice on the contribution of science, technology and industry to well-being and economic growth. STI Policy Papers cover a broad range of topics, including industry and globalisation, innovation and entrepreneurship, scientific R&D and emerging technologies. These reports are officially declassified by an OECD Committee.

English

Are industrial policy instruments effective?

A review of the evidence in OECD countries

While the case for industrial policy is gaining traction across OECD countries, little consensus exists on the effectiveness of such interventions. Building on a new analytical framework for industrial policy developed in a companion paper, this paper reviews the empirical literature on the effectiveness of industrial policy instruments, laying out the knowns and unknowns. Overall, it strongly supports the premise that well-designed economic incentives for firms and good framework conditions shaping the business environment are effective. At the same time, it emphasises the limited and inconclusive nature of the evidence regarding the increasingly frequent targeted and demand-side instruments. Finally, it underlines the complementarities between economic incentives and other interventions such as skill policies or framework conditions, notably competition and trade policies. Framework conditions are indeed key in enabling the most productive firms to grow and an important channel for structural change.

English

Keywords: public guarantees, industrial policy, subsidies, public venture capital, public loans, tax expenditures
JEL: O25: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy / Industrial Policy; L52: Industrial Organization / Regulation and Industrial Policy / Industrial Policy; Sectoral Planning Methods; L53: Industrial Organization / Regulation and Industrial Policy / Enterprise Policy; Q58: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environmental Economics: Government Policy; O38: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Technological Change: Government Policy
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