Industrial Policy Reconsidered Based on Recent Debates

Author Name AMBASHI Masahito (Consulting Fellow, RIETI)
Creation Date/NO. July 2022 22-P-016
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This paper attempts to reconsider recent debates on industrial policy from the academic perspective while maintaining awareness of practical perspectives. Not only have the roles of industrial policy been reevaluated in many countries since the 2008 global financial crisis, but the scope of governments has been expanded with the development of industrial policy. First, this paper shows that the expectation toward industrial policy has also increased in academia based on this background and that the academic definition of industrial policy has expanded to include a wide range of measures that address social and economic challenges, while its role is basically limited to the modification of market failures. Second, after reviewing traditional, theoretical rationales and critiques for industrial policy presented in economics, this paper surveys economic empirical research based on recent “evidence-based policy making (EBPM),” focusing on Japanese industrial policy cases. Third, this paper highlights authors who advocate “new industrial policy” and elaborates on the “mission-oriented approach” to industrial policy that emphasizes the importance of creating and shaping markets beyond the mere modification of market failures. Finally, this paper discusses challenges and future perspectives surrounding academic debates on industrial policy, considering the real implementation in countries including Japan.