## Industrial Policy for Growth and Diversification: A Conceptual Framework

_Departmental Papers, September 30, 2022_

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## Bibliographic details
- Authors: Reda Cherif, Fuad Hasanov, Nikola Spatafora, Rahul Giri, Dimitre Milkov, Saad N Quayyum, Gonzalo Salinas, Andrew M. Warner
- Published: September 30, 2022
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9798400214271.087

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### Summary
- Purpose: Presents a conceptual framework to analyze industrial policy, defined as targeted sectoral interventions.
- Context: Countries aiming for a strong recovery and to recoup losses incurred during the COVID-19 pandemic need a new path for development and high and sustained growth.
- Priority: Promoting diversification, developing new industrial capabilities, and designing the policies needed to achieve this goal.
- Core argument: A successful diversification strategy should tackle both broad policy failures (for example, an unfavorable business environment and investment climate) and sector-specific market failures.
- Structure of the paper:
  - Discusses key principles guiding policymakers: focus on market failures that could justify targeted sectoral interventions and potential government failures that can undermine these interventions.
  - Discusses commonly employed policy tools, their rationale, and associated pitfalls.
  - Outlines a stylized decision-making framework.

### Key principles for policymakers
- Focus on market failures that could justify targeted sectoral interventions.
- Consider potential government failures that can undermine interventions.
- Balance sector-specific interventions with reforms addressing broad policy failures, such as an unfavorable business environment and investment climate.

### Policy tools and considerations
- The paper discusses commonly employed policy tools, including their rationale and associated pitfalls.
- Emphasis on:
  - Rationale for targeted sectoral interventions.
  - Risks from government failures that may negate intended benefits of interventions.

### Decision-making framework
- The paper outlines a stylized decision-making framework to guide industrial policy choices.
- Framework links identification of market failures, assessment of government capacity and risks, and selection of appropriate policy tools.

### Subjects and keywords
- Subjects: International organization, International trade, National accounts, Political economy, Taxes, Technology
- Keywords: Diversification, diversification strategy, East Asia, Economic Development, Exports, Global, IMF Library, IMF team, Industrial Policy, Infrastructure, policy failure, Policy tool, Tax incentives

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_Source: https://www.imf.org/en/publications/departmental-papers-policy-papers/issues/2022/09/28/industrial-policy-for-growth-and-diversification-a-conceptual-framework-519714_