Production Network Features of Industrial Policy

IMF Working Papers, January 17, 2025

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Industrial policy has gained popularity in recent years and across all regions and income levels.
The analysis explores the role of domestic production networks in sector targeting, while controlling for other sector and global value chain characteristics.
Combining datasets on industrial policy (Global Trade Alert) and input-output linkages (ICIO, OECD) provides novel insight into the network features of industrial policy.
A sector’s “centrality”—i.e., its degree of connectedness—within the domestic production network is an important and significant predictor of sector intervention.
Industrial policy is used differently across:
- regions,
- income groups,
- time periods,
- types of policy tools.
Regional and income-group patterns:
- Emerging economies tend to target more central sectors.
- Advanced economies tend to target less central sectors, on average.
Temporal pattern:
- There has been a global shift toward more central sectors over time.
Policy-tool differentiation:
- Subsidies are deployed on more central sectors.
- Tariffs are used on less central sectors.

Industrial policy dataset: Global Trade Alert.
Input-output linkage dataset: ICIO, OECD.
The study controls for other sector and global value chain characteristics when assessing the role of domestic production-network centrality in sector targeting.

Subjects: Emerging and frontier financial markets, Export restrictions, Exports, Financial markets, Income, International trade, National accounts.
Keywords: advanced economy, Asia and Pacific, country-sector control variables, Emerging and frontier financial markets, Europe, Export restrictions, Exports, Global, Global Value Chains, import tariff result, Income, Industrial Policy, input-output linkage, Middle East and Central Asia, production network feature, Production Networks, sector intervention, Spillovers, standard deviation, Subsidies, Trade Policy.