Characteristics of Companies and Workers that Support Industrial Policy

Active Implementation of Industrial Policy and Economic Analysis

In recent years, major countries have been actively implementing industrial policies. In Japan as well, the Ministry of Economy, Trade and Industry (METI) started to advocate the "Mission-oriented Economic and Industrial Policy" as the "New Direction of Economic and Industrial Policies" three years ago. According to the IMF's New Industrial Policy Observatory (NIPO) database, which records announced or implemented industrial policies around the world, waves of new industrial policies have arisen mainly in advanced countries and subsidies are the most frequently used policy instrument (Evenett et al., 2024).

The scope of industrial policies is very wide. I teach a section on industrial policy, or policies targeting industries and companies, within a graduate school class titled "Introduction to Evidence-based Policymaking (EBPM)," covering such topics as R&D grants and tax incentives, corporate taxation and financial assistance, regulations and competition policies, corporate governance systems, industrial location policies, and trade policies.

Papers that survey research on a wide range of industrial policies include Pack and Saggi (2006), Harrison and Rodríguez-Clare (2010), Juhasz, Lane, and Rodrik (2024). These papers universally point out, although with some differences in nuance, that industrial policies are theoretically justified when there is a market failure, such as externality, learning effect, or coordination failure. On the other hand, research that clarifies the effectiveness of industrial policy based on causal analysis is limited and empirical evaluations are far from reaching a consensus. Juhasz, Lane, and Rodrik (2024) point out that industrial policies are based on economic grounds and state that national governments should consider industrial policies focused on productivity improvements in the services industry (retail business, service business, medical services, and long-term care services, etc.) and I agree with their view.

This column shifts perspective to introduce what types of companies and workers support industrial policy based on surveys targeting companies and workers. In the field of international economics, there have been many political economic analyses examining the characteristics of individuals who support or do not support, for example, protectionist trade policies (as examples from Japan, Ito et al., 2019; Tomiura et al., 2019). Similar studies on income redistribution policies have also been frequently undertaken (e.g., Ohtake and Tomioka, 2004). However, I have not found research that specifically covers the characteristics of companies and workers that support industrial policy as a whole. Such research is different from evidence-based policy making research, but understanding the characteristics of potential supporters and opponents could prove beneficial in designing and planning industrial policy.

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